The Georgia Department of Revenue issued a LR SUT 2017-16 addressing whether a Taxpayer is required to collect Georgia sales and use tax on certain repair transactions when they receive a resale certificate or an exemption certificate indirectly through a third-party.  The Taxpayer is a producer of truck bodies that are built and installed on the customer’s chassis.  Taxpayer has parts and service centers throughout the country that provide service and repairs all truck bodies, including truck bodies produced by competitors.  At issue is the relationship between Taxpayer and a customer who is not registered to collect sales and use tax in Georgia.

Specifically, the customer assists in coordinating repairs for truck body owners with Taxpayer.  When a repair is needed, the truck body owner contacts the customer, who then proceeds to arrange the repair with Taxpayer.  When the repair is complete, the Taxpayer invoices the customer for repair labor and parts.  The customer submits either a resale certificate or the truck body owner’s exemption certificate on payment.  Subsequently, the customer invoices the owner of the truck body.

Georgia imposes a tax, subject to certain specific exemptions, on the retail purchase, retail sale, storage, use, or consumption of tangible personal property, certain enumerated services, and utilities.  Specifically, the term “retail sale” means any sale, lease, or rental for any purpose other than for resale, sublease, or subrent.  Any dealer that makes a sale for resale which is not in strict compliance with the Department’s rules and regulations will be liable for and must pay the tax.

Generally, all gross sales of a retailer are subject to sales and use tax until the contrary is established.  The burden of proving that a sale is not a sale at retail rests with the seller, unless the seller, in good faith, accepts a certificate of exemption from the purchaser that states the property is being purchased for resale or is otherwise tax exempt.

The Department expressed a certificate is taken in good faith when a seller obtains a certificate from the purchaser that is: (1) fully completed, including, but not limited to, the name, address, sales tax number, and signature of the taxpayer when required; (2) in a form appropriate for the type of exemption being claimed; (3) claiming an exemption statutorily available on the date of the transaction in the jurisdiction where the transaction is sourced; (4) claiming an exemption that could be applicable to the item being purchase; and (5) claiming an exemption that is reasonable for the purchaser’s type of business.  Furthermore, when a certificate is taken in good faith, the seller is relieved from the burden of proof on sales made for resale when the seller acquires a properly completed certificate from the purchaser and the purchaser: (1) is engaged in the business of selling tangible personal property; (2) has a valid sales tax registration number at the time of purchase and has listed their sales tax number on the certificate; and (3) the seller has no reason to believe that the purchaser does not intend to resell it in their regular course of business.

The Department mandates that a seller must obtain information, as determined by the commissioner, for proof of a claimed exemption.  Furthermore, dealers must maintain records to support all purchases and sales for a period of no less than three years. Here, the Department held that Taxpayer could not accept a resale certificate from the customer in good faith because the customer was not engaged in the business of selling repairs or repair parts.  Additionally, the customer did not have a valid Georgia sales tax registration number to list on the sales tax number on the certificate.  Since the Taxpayer can only accept in good faith properly completed exemption certificates from the purchaser under certain circumstances, they cannot, in good faith, accept a third party’s exemption certificate from the customer.

The customer cannot fully complete the certificate of a third party and is also not engaged in the business of making taxable sales.  Taxpayer also cannot, in good faith, accept an exception certificate from the customer, if the exemption certificate asserts a third party’s exemption because the customer is the purchaser, no the third party.  Since the Taxpayer cannot acquire these certificates in good faith, they cannot use those documents to establish that they are not required to collect sales and use tax from the customer.

To register to pay tax in Georgia you will need to visit the Georgia Tax Center Website. If you would like to apply for a voluntary disclosure you can apply using the Voluntary Disclosure Application. If you have erroneously remitted taxes on qualifying exempt transactions, you may qualify for a tax refund.  To apply for a tax refund with the Georgia Department of Revenue Taxpayers may submit the applicable ST-12 Claim for Refund. A qualified tax attorney can assist with the execution of the application and potential questions or concerns that may arise in the process.

Jeanette Moffa is an attorney who concentrates on state and local taxes at Moffa, Sutton, & Donnini, P.A. She is an executive council member of the American Bar Association Tax Section State and Local Tax Committee and the Florida Bar Tax Section. Ms. Moffa is an author of both the CCH’s Expert Treatise Library: Sales and Use Tax as well the ABA’s Sales and Use Tax Deskbook. In addition, her regular columns on state and local tax issues can be found in State Tax Notes and Actionline, a publication from the Florida Bar’s Real Property, Probate, and Trust Law Section. She also serves as assistant editor to the Sales and Use Tax Deskbook and Actionline. Ms. Moffa is a regular speaker at the American Bar Association Tax Section conferences, the Institute of Professionals in Taxation, the Florida Bar Tax Section, the Florida Bar Real Property, Probate, and Trust Law Section, and the FICPA. In her free time, she teaches as an adjunct professor at Broward College. She can be reached at JeanetteMoffa@MSDTaxLaw.com.

Posted in Georgia Sales Tax, Multi-state sales and use tax