Sales Tax Obligations of a Seller in Georgia

April 13, 2006

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As a seller, you have the obligation to pay sales taxes to the state. While the state requires your customers to reimburse you for the sales tax, you're going to have to make sure you collect the right amount of sales tax. If you don't, Georgia has the right to pursue your customer for the right amount of tax. However, this will not be very practical if the purchaser cannot be tracked down. Accordingly, the state may demand that you make up any underpayment. For this reason, we recommend that you review the following discussions in order to avoid undercollecting sales tax from your customers.

Procedure for accepting a resale certificate. If your customers purchase goods or products for resale in their business, Georgia provides a resale exemption from sales tax. Georgia does not set forth any specific procedures for accepting a resale certificate. However, you should require that the purchaser present, in good faith, a resale certificate that includes the following information:

your and your customer's name and address
an indication of the general character of the property your customer is purchasing
your customer's registration number

Procedure for accepting blanket resale certificates. A blanket resale certificate is a resale certificate provided to you by those customers who make numerous exempt resale purchases from you. The idea is that by maintaining a blanket resale certificate, both you and your customer can avoid the hassle of having to present a certificate every time your customer makes a purchase. The law does not set forth any specific procedures for accepting a blanket resale certificate. However, you should require that the purchaser present, in good faith, a blanket resale certificate that contains the same information as the regular resale exemption certificate.

The blanket resale certificate will remain valid for an indefinite time period, unless the state revokes the certificate due to misuse.

Sales and use tax liability for out-of-state mail order and catalogue retailers. Georgia has a statute that specifically taxes out-of-state mail order and catalogue sellers. However, you will be responsible for paying this tax only if your business has physical presence within Georgia. To determine if you have a physical presence, ask yourself the following:

Do I have retail facilities, a warehouse or any office space in Georgia? Maintaining retail or warehouse facilities means that your business has a physical presence within the state. Also, if you have an office for employees, even for business activities unrelated to mail order sales, your business will have a physical presence within the state.
Do my employees or I enter Georgia for purposes of taking and transmitting orders from customers in Georgia? If your employee or independent contractor enters Georgia for purposes of taking or transmitting orders, your business has a physical presence in Georgia. However, contracting with a common carrier to deliver mail order goods does not constitute physical presence within the state.
Do my delivery vehicles frequently enter Georgia for purposes of delivering property? Frequent deliveries in Georgia by your trucks will give you physical presence in Georgia. An occasional delivery, however, may not constitute a physical presence within the state.

Passing on the sales tax to your customers. You will be responsible for paying Georgia sales taxes, but the law requires you to pass it on to your customers. State law does not allow you to pay the tax out of your pocket — what as known as absorbing the tax. Furthermore, you can't advertise or represent to the public that you will absorb the tax.

Calculating sales taxes. You calculate sales taxes by taking the tax rate, which is 4 percent and multiplying it by your gross receipts. Gross receipts are based on your total retail sales or services you provide in Georgia.

Claiming a refund of overpayment for sales and use taxes. If you frequently audit your sales transaction reports, you may discover that through an error, sales or use tax was overpaid on a transaction. If you or your customer discover such an overpayment, the state allows you or your customer to file a claim form ST-12 for a credit or refund. You or your customer should submit the claim on forms furnished by the Georgia Department of Revenue. The state will normally issue a credit memorandum rather than give a refund to the person who made the erroneous payment.

Time limitations for filing a refund claim. If you're going to file a refund claim for overpayment of sales or use tax, you'll have to do it within three years from the date you paid the tax. If you file a refund claim after that time, the state will not approve it.