Sales taxes are an important part of doing business in Georgia, particularly when it comes to tangible personal property. Sales tax compliance is crucial for retailers in the state, as well as businesses selling online or remotely from out of state to customers in Georgia. Sales tax impacts retailers in the state, as well as businesses selling online or remotely from out of state to customers in Georgia.

In this article we will focus on how the Georgia sales tax affects your business.

Does Sales Tax Apply to Amazon Sales in Georgia?

Amazon sales tax in Georgia applies when a seller has nexus with the state, and for sales made through Amazon’s marketplace, Amazon generally collects and remits the tax as the marketplace facilitator when the seller’s Georgia sales exceed $100,000 a year. For business owners, online sellers, Amazon merchants, and the accountants and tax professionals who support them, Georgia sales tax still creates a significant compliance burden, with returns often due monthly and a sales tax permit required before a business can legally collect tax.

This overview explains the Georgia rules that drive Amazon sales tax obligations, including physical and economic nexus, local sales tax rates across Georgia, registration and filing requirements, exemptions, and audit defense issues. The Georgia Department of Revenue aggressively audits businesses within Georgia and throughout the country to enforce these rules, so understanding when tax applies and who must collect and remit it is essential to avoid penalties, audit exposure, and costly compliance mistakes on sales of tangible goods in the state.

What is Georgia Nexus?

Nexus is a key concept for sales tax.  If your business has nexus, then you need to get a sales tax permit from the state, collect sales tax from your customers and remit sales tax to the state Department of Revenue (not the IRS).  If you don’t have nexus, then you don’t have to worry about sales tax.

Before 2018, nexus meant physical presence.   This refers to the existence of property (including inventory), payroll, or an office or warehouse in the state.

Georgia Enacted Economic Nexus in 2019

In 2018, the U.S. Supreme Court ruled in South Dakota v. Wayfair, Inc. that businesses with no physical presence in a state (such as online sellers) can establish nexus through economic activity, or economic nexus.  Economic nexus means that a business (typically a remote or online seller) exceeds a certain dollar value of sales into the state, or a certain number of sales transactions into the state.  Each state sets its own threshold.

As a result of this case, there are now two kinds of nexus which trigger a sales tax obligation:

• physical nexus, or
• economic nexus

 

An out-of-state business that meets either a state’s economic nexus threshold or physical nexus threshold must comply with state sales tax laws.  This includes obtaining a sales tax permit, collecting sales tax, submitting it to the state and filing regular sales tax returns.   There is no difference between an in-state business and an out-of-state business once either physical nexus or economic nexus is established.

Georgia Sales Tax: How Does it Work?

The Georgia Department of Revenue (DOR) manages sales tax collection in the state. Sales tax in Georgia, as in most states, is collected by the seller from the customer. The business functions as the tax collector.

In addition to the state sales tax, there is also a local tax that applies. The local tax rate combines with the state sales tax rate to form the total sales tax rate. This combined rate applies to the storage, use, and consumption of tangible personal property, as well as certain retail services.

It is incredibly important to remember that sales tax collected from customers belongs to the state of Georgia, not the business or the business owner. Failure to remit sales taxes to the state, and failure to follow all the other sales tax regulations of Georgia, are serious offenses that the state will pursue with vigor.

Furthermore, if a business meets the nexus threshold in Georgia and chooses not to comply with the law, the business and the business owner will be personally responsible for the tax due, plus penalties and interest. The state will not bother to hunt down the customers to collect missing sales taxes. They will pursue the business and its owners to get the tax.

Example of Sales Tax Rates in Atlanta and Other GA Cities and Towns

The sales tax rate in Georgia is 4%.  In addition, some local jurisdictions also have a sales tax which is in addition to the state sales tax rate.

Depending on the location within Georgia, combined state and local sales tax rates range from 4-9%.

The sales tax rate in Atlanta (Fulton County) is 8.9%.   This includes 4% for Georgia, 3% for Fulton County, 1.5% for Atlanta, and 0.4% for Atlanta TSPLOST (Transportation Special Purpose Local Option Sales Tax).

In Fulton County, certain exemptions apply to specific types of fuel. For instance, motor fuel, as defined under Georgia law, is excluded from certain sales tax provisions, particularly concerning public mass transit and other specified uses.

Additionally, the Fulton TSPLOST does not apply to the sale or use of jet fuel when it’s sold to or by qualifying airlines at qualifying airports, highlighting regulatory frameworks surrounding fuel types and tax implications for aviation-related entities.

Here are a few other examples of locations in Georgia:

• Dacula, GA (Gwinnett County):  6%
• Sandy Springs, GA (Fulton County): 7.75%
• Dunwoody, GA (DeKalb County):  8%
• Columbus, GA (Muscogee County):  9%

Example of Retail Sales in Atlanta

If you buy supplies at the Home Depot in Atlanta, you will pay a sales tax rate of 8.9%.  But if you drive up the Georgia 400 to the Home Depot in Sandy Springs, you will pay a sales tax rate of 7.75% on the very same supplies.

CPA Note:  In the case of online or remote sales, the sales tax rates are determined by the ship-to address of the buyer, not the address of the seller.

Georgia Sales Tax Nexus

As stated above, sellers have nexus in Georgia either through physical nexus (property, payroll or an office or warehouse in Georgia) or economic nexus (based on sales), which creates sales tax obligations.  Here is a summary of when Georgia sales tax nexus triggers a sales tax obligation in the state:

• When an out-of-state seller has an affiliate located in Georgia.  (affiliate nexus)
• When an out-of-state seller pays a Georgia business for referring potential customers through an internet link or website.   The threshold is $50,000 in sales from referrals in Georgia.   For example, a Georgia resident is an author with her own website. On her website she sells her books through an online seller and displays a link to the company’s website. The customer is able to “click through” to the website and purchase the book, which is subject to sales tax in Georgia.   If the online seller has sold more than $50,000 in taxable sales to customers in Georgia, the online seller must collect the tax and remit it to the Georgia Department of Revenue.  (click-through nexus)
• When an out-of-state business has over $100,000 in gross sales in Georgia, or more than 200 retail sales transactions in Georgia, per year.  (economic nexus)
• Making sales through a marketplace facilitator, such as Amazon, under House Bill 276.  In such case, Amazon collects the tax and remits it to Georgia for marketplace sales shipped within the state.  The threshold for facilitators is $100,000 or more in sales into Georgia per year. (marketplace sales) Third-party sellers generally do not need to calculate or remit sales tax on those Georgia marketplace orders.
• Storing property for sale in the state.  This includes merchandise owned by Fulfillment by Amazon (FBA) sellers, where the merchandise is stored in a warehouse in Georgia owned or operated by Amazon.  As a result, sellers on Amazon need to find out if their inventory is stored by Amazon in a Georgia warehouse, whether or not they sell to Georgia customers.  Amazon is able to provide this information to its sellers.  (inventory in the state)
• Orders taken or sales made during conventions or trade shows in Georgia.

Georgia Sales Tax Registration

Sales tax registration is one of the first things a new business should do after they create their legal entity, get an employer identification number (EIN) from the IRS and open a bank account.

Businesses register online for Georgia sales tax through the Georgia Tax Center (GTC), and registration is free.  Annual sales tax renewals are not required.  Registration remains in effect as long as the business exists with no change in ownership or structure. A new owner must register if they acquire an existing business in Georgia.

Collecting Sales Tax in the State

The calculation of sales tax collection depends on how the goods are sold.  Here is a summary:

• Brick-and-mortar stores:   The sales tax rate is based on the location of the store.
• Hosted stores:   Shopify and Squarespace will usually take care of the sales taxes for you, including determination of the correct rates.
• Marketplaces:  Amazon and Etsy will usually take care of the sales taxes for you, and Amazon automatically calculates state and local sales tax based on the shipping address so sellers can better manage compliance. Amazon typically collects Georgia sales tax at checkout for consumer purchases.
• Mobile point of sales:  Systems like Square rely on GPS to determine sale location and the proper sales tax rate.

What Items are Exempt from Sales Tax in Georgia

Most taxable goods sold in Georgia, including through Amazon, are subject to sales tax. For example, sales of clothing are subject to sales tax. (The Atlanta sales tax on clothing is 8.9%).

Certain types of merchandise are exempt from sales tax in Georgia, but only for certain goods under Georgia law. These include prescription drugs, medical supplies, and manufacturing equipment. Sales of items for resale (inventory) is not subject to the GA sales tax. Non-prepared food items are exempt from state sales tax, but are subject to local sales taxes.

Most services are exempt from sales tax in Georgia. However, Georgia does tax the sale of accommodations (hotels), in-state transportation of individuals (e.g., taxis, limos), sales of admissions, and charges for participation in games and amusement activities. Georgia also expanded its sales and use tax laws to include some digital goods starting January 1, 2024.

Some customers are exempt from paying sales tax in Georgia. These include government agencies, some nonprofit organizations, and merchants purchasing goods for resale. See our article about which nonprofit organizations are exempt from sales tax and what they have to do to maintain their exemption.

Exemption Certificate

Sellers are required to collect a valid written exemption or resale certificate from buyers to validate exempt transactions.   In the event of a sales tax audit, the state will hold the business liable for sales taxes if exemption or resale certificates were not properly completed or obtained.   And add on to that interest and penalties.

Is Shipping and Handling Subject to Sales Tax?

Georgia sales tax generally applies to shipping and handling charges for taxable sales to Georgia residents.  It does not matter whether the charges are separately stated or included.  Do keep in mind, however, that there are many exceptions related to sales tax on shipping and handling.  This should be checked on a case by case basis.

Delivery charges for exempt sales are generally exempt.

Remitting Georgia Sales Tax Returns

Filing a Georgia sales tax return includes submitting the required sales data and remitting the collected sales tax to the Department of Revenue. Georgia requires returns to be filed by the 20th of the following month.

Businesses use Georgia Form ST-3 to file and remit sales taxes to the the Georgia Department of Revenue.  Businesses that owe more than $500 in sales tax are required to file online via the Georgia Tax Portal.

Businesses are required to file sales tax returns at the completion of each collection period, whether or not sales tax was collected. If no sales tax was collected, the business must file a “zero return.” Businesses often miss this requirement.  Failure to do so may result in penalties and interest. Penalties increase the longer a return goes unfiled.

The frequency of filing sales tax returns in Georgia depends on the size of the business or the volume of sales.  The Department of Revenue tells each business how often they need to file and remit sales taxes.  Filing frequencies can be monthly, quarterly or annually. If assigned a monthly filing frequency, businesses should plan each month for remitting Georgia sales tax by the deadline.

Sales Tax Services for Businesses

At our Atlanta-based accounting firm, we frequently prepare a Sales Tax Matrix as part of our comprehensive sales tax services for clients with potential sales tax issues.  The purpose of the Matrix is to calculate the most accurate sales tax rate for the customers of our clients.   The matrix also shows the various types of nexus (and thresholds) for every state and local jurisdiction, based on the type of goods and services that are being sold.   We do this for locations throughout Georgia, as well as for all states nationwide that have a sales tax.

The Sales Tax Matrix is one of our most valuable CPA tax services.  It is an excellent way for businesses to stay organized about sales taxes when they have customers in many states, keep on top of sales tax filing deadlines, avoid a sales tax audit and never charge customers too much or too little in sales tax.  The Sales Tax Matrix is particularly valuable for eCommerce, technology, software and online retailers.

We also prepare sales tax returns and sales tax registrations in Georgia and all other states.

And we handle sales tax audits, including sales tax nexus letters from the states.

Nexus in Georgia and the Sales Tax Audit – Powered by Avalara

Georgia, like all states, is actively auditing in-state and out-of-state businesses for Georgia sales tax compliance.  Please check out our article on Sales Tax Audits for an in-depth discussion of this topic.

Nexus is an issue that is fundamental to sales tax audits for businesses with multi-state operations.  This is particularly true for online sellers, eCommerce and software providers.  Thus, an evaluation of nexus is often a critical part of an effective sales tax audit defense.

At Massey and Company CPA, we use software tools powered by Avalara as a foundation for our sales tax audit defense on behalf of our clients.  We also use these tools to proactively avoid sales tax audits in the first place.

Audits of Georgia Sales Taxes: Examples

Here are some example of how we utilize these tools when defending business clients that are under audit for sales tax issues:

• Provide up-to-date sales tax research for all 50 states and the District of Columbia
• Model fact patterns based on real-life scenarios
• Research sales tax obligations in complex multi-state industries, such as SaaS, technology and eCommerce
• Examine industry-wide sales tax practices on a national basis in such areas as business services, construction, food and beverage, restaurant, healthcare, hospitality, manufacturing, retail, shipping and warehousing
• Develop taxability charts per item across all states
• Validate sales tax rates by city, state, county, zip code, and geolocation

 

When representing a client in a sales tax audit, whether in Georgia or any other state, we are always respectful and friendly to the auditor, but our sales tax audit defense strategy is robust, strong and fact-based.

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If you want my team and I to handle your tax matter for you, click here.

You are welcome to email me directly at gary.massey@masseyandcompanyCPA.com.

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Massey and Company CPA is a boutique tax and accounting firm serving individuals and small businesses in Atlanta, Chicago and throughout the country.  Our services include tax return preparation, tax planning for businesses and individuals, estates and trusts, IRS tax problem resolution, IRS audits, sales taxes, small business accounting, and bookkeeping clean up services. 

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