TAX NEWS - January 2009

Business tax / Manufacturing tax / Sales Tax FAQ - State of Georgia taxes

Q. How do I obtain a sales tax number?

A. Taxpayers should complete Form CRF-002 to obtain a sales tax number. Contact the Registration & Licensing Unit at 1-877-GADOR11 (1-877-423-6711) for additional registration assistance or information.


Q. How do I apply for a FEIN?

A. A FEIN is issued by the Internal Revenue Service. The application, Form SS-4, can be downloaded from the IRS's website, www.irs.gov.


Q. Why are corporate officers required to provide their social security numbers when applying for an account number?

A. Sales and use tax is classified as a trust fund for taxes collected on behalf of the state. Therefore, corporate officers are held liable in the event of default.


Q. Is a nonprofit organization registered with the Internal Revenue Service (IRS) as a 501(c)(3) corporation exempt from Georgia sales and use tax?

A. Unless specifically exempt under Georgia law, nonprofit organizations are subject to Georgia sales and use tax. See O.C.G.A. § 48-8-3 for a list of qualifying exemptions.


Q. What transactions are subject to the 1% Atlanta municipal sales and use tax?

A. The 1% City of Atlanta municipal sales and use tax is collectable on transactions where the customer takes delivery of the item being sold or an item is used within the incorporated city limits of Atlanta. It generally applies to all sales that are subject to the 4% State Tax except motor vehicle sales. You may use the City of Atlanta's Address Locator to determine if an address is located in the incorporated City of Atlanta. For more information, contact the Atlanta Mayor's Office at 404-330-6100 or by e-mail to rrivers@atlantaga.gov.


Q. How does sales tax apply to cable boxes?

A. If the cable company itemizes the charge for the cable box, sales tax applies to the charge. If it is bundled in with the service, the cable company is liable for use tax on the cost price.


Q. Are items taken out of resale inventory and donated to a nonprofit organization subject to sales and use tax?

A. Yes. The tax is required to be paid on the cost price of the donated item. If the item is donated by a manufacturer, the tax must be paid on the fair market value.


Q. Is a manufacturer's coupon applied toward the total sales price before or after sales tax is calculated?

A. After sales tax is calculated. A retail dealer's acceptance of a manufacturer's coupon represents a promise by the manufacturer to compensate the dealer at a future date. Since consideration is paid in exchange for accepting the coupon and compensation by the manufacturer occurs after the sale is completed, the coupon is applied after sales tax is calculated.


Q. Is a retail dealer's coupon applied before or after sales tax is calculated?

A. Before the sales tax is calculated. A retail dealer's coupon is considered a price adjustment that occurs at the time of sale. As a result, the coupon is applied before sales tax is calculated.


Q. When is fabrication labor on metal taxable?

A. A fabrication company that fills a customer's order by fabrication metal is required to tax the fabrication labor associated with creating the metal. A real property construction contractor that fabricates and installs the metal is deemed the end consumer and generally pays sales and use tax on the metal only. Consequently, fabrication labor in this example is taxable to the contractor and not the consumer or the person who places the order with the contractor.


Q. Is freight taxable?

A. Yes, freight is subject to tax. When arranged by the seller, freight is considered to be a component of a taxable transaction and therefore subject to sales tax.


Q. Is installation labor taxable?

A. When separately stated on a customer's invoice, installation labor is not taxable. If bundled together on an invoice with the sale of tangible personal property, the entire sale is subject to sales and use tax.


Q. Is repair labor taxable?

A. When separately stated on a customer's invoice, repair labor is not taxable. If repair labor is combined on an invoice with the retail sale of tangible personal property, the entire transaction/sale is subject to sales tax.


Q. Is a contractor responsible for payment of sales and use tax on items used in a State or Federal Government construction contract?

A. A contractor is responsible for the tax on all items used in a real property construction contract.


Q. Are contractors liable for payment of tax on items that are given to them?

A. A contractor is responsible for payment of the tax on any item given to them when Georgia sales tax was not paid at the time of purchase.


Q. The county just voted to raise the local tax. How does this affect a contractor?

A. Any new MARTA, Special, Education, Local Option, or Municipal Special Option Tax would not apply to construction materials sold or used as a result of a bid actually submitted in response to a bid advertisement before the election date of the new tax.


Q. Is a restocking fee subject to sales and use tax?

A. If the sale is fully refunded to the purchaser/customer, the restocking fee is not taxable.


Q. Is sales tax calculated before or after the amount allowed for a trade-in?

A. After. The tax is calculated after deducting the trade-in amount that the dealer is allowing as credit on a purchase.


Q. Is tangible personal property purchased over the Internet subject to Georgia sales and use tax?

A. Yes. Tangible personal property purchased via the Internet and delivered to a Georgia address by a vendor based in Georgia is subject to Georgia sales and use tax. Tangible personal property purchased via the Internet and delivered to a Georgia address by a non-Georgia based vendor is also subject to Georgia use tax. Taxpayers are required to report and remit use tax on Form ST-3USE. The tax rate is based on the county where delivery takes place.


Q. Is the purchase of tangible personal property from a mail order catalog subject to Georgia sales and use tax?

A. Yes. Mail order or catalog sales delivered to a Georgia address by a vendor based in Georgia are subject to Georgia sales tax. Mail order or catalog sales delivered to a Georgia address by a vendor located outside Georgia is subject to Georgia use tax. Taxpayers are required to report and remit use tax on Form ST-3USE. The tax rate is based on the county where delivery takes place.


Q. How do I obtain a tax exemption for machinery used in a manufacturing facility?

A. New manufacturing facilities must apply for a tax exemption by filing Form ST-M1. Existing manufacturing facilities may use Form ST-5M. See the Manufacturing Machinery Exemptions Guide for additional information.


Q. Are repair parts exempt from Georgia sales and use tax when used on exempt machinery?

A. Yes. The exemption is 100% phased in as of January 1, 2005. Manufacturers must retain documentation of the parts used on exempt machinery.


Q. Do I need a temporary sales and use tax account number to sell tangible personal property at a retail miscellaneous or one-time event?

A. No. File Form FS-32, Miscellaneous Events. You may also report the sale on Form ST-3, Sales and Use Tax Report, and check the "One-Time Only Sale" box. This box is located on the upper right-hand side of the form.


Q. What is the legal support for point of delivery?

A. This law defines a sale as occurring where possession, title, or both are transferred to the end consumer.


Q. An Arizona company delivers tangible personal property to a Georgia company. The bill is sent to a Florida company. To which state should sales be paid?

A. Sales and use tax is due to the state of Georgia. Sales tax is collected at the point of delivery to the end consumer.


Q. Company B, who is not registered in Georgia, orders goods from Company A who is registered in Georgia, who will ship them to Company C in Georgia. Is Georgia tax due?

A. Company B can give a resale certificate to Company A. B may give the home state certificate of exemption to A. To see a more detailed explanation go to (www.etax.dor.ga.gov or other link here).


Q. On what amount is sales tax calculated in relation to a bingo session?

A. Gross receipts. This figure represents the revenue derived from the sale of bingo cards.


Q. How can I obtain information about agricultural machinery and equipment?

A. See the Agricultural Machinery and Exemptions Guide for information.