In Georgia, businesses that meet the legal definition of “dealer” must have a sales tax certificate. This includes those who sell or import for sale tangible property, maintain a place of business within the state, manufacture goods for retail sale, or solicit business in Georgia. This means that both in-state and out-of-state businesses may be required to have a Georgia sales tax certificate.
However, having a sales tax certificate comes with certain responsibilities and obligations. Falling short of those obligations can lead to the revocation of your tax certificate, resulting in significant problems for your business. Per Georgia Code 48-8-62, the state of Georgia has the legal right to revoke a business’s certificate if the business breaks certain rules or regulations relating to sales tax. Learn more about how revocation happens, how you can protect your business, and how to prevent the loss of your business license.
Key Takeaways
- Most businesses operating in Georgia and many out-of-state businesses with a customer base in Georgia must have a sales tax certificate.
- Failure to file on time, pay on time, or otherwise follow tax laws may lead to the loss of your license.
- Be prepared to fix the issues that led to revocation if you want your license reinstated.
- In extreme cases, these issues may lead to criminal charges.
Common Causes of Sales Tax Certificate Revocation in Georgia
Sales and use tax is a trust fund tax in Georgia. This means that businesses are expected to collect it from customers and remit it to the state on their next scheduled payment date. Sales tax is actually paid by individuals to the state, but it’s collected by businesses.
That means that sales tax is the property of the state, and businesses are not to use it for any other purpose. Because of this, the regulations around sales tax certificates are very strict. Some of the most common reasons businesses may lose their license include:
- Failure to file sales tax returns: Most business owners file their required sales tax returns electronically, as only those with very low sales tax balances can file on paper. Payments are typically due monthly, but some business owners are on quarterly or annual schedules. If a business consistently fails to file tax returns, the Department of Revenue may revoke its sales tax certificate.
- Failure to remit sales tax: Even if a business files its returns on time, it may still lose its certificate if it doesn’t actually remit its collected sales tax. There are also penalties for paying or filing sales tax late.
- False or fraudulent returns: Businesses that file returns with false or fraudulent information are often penalized with the loss of their sales tax certificate.
- Inaccurate registration information: Businesses have an obligation to keep their information up-to-date with the appropriate owner name, address, and contact information. If the Department is unable to contact an entity because its information is inaccurate, its certificate may be revoked.
- Chronic issues: The Department of Revenue is generally forgiving of one-time issues if business owners are compliant going forward. But if a business entity constantly files returns late, pays late or not at all, or submits returns with incomplete information, the DOR may revoke its certificate.
What to Expect After Your Certificate is Revoked
Under Georgia Code 48-8-62, the Department of Revenue must follow certain protocols to revoke a sales tax license. The state will first notify the person of its decision and provide a date and time for a hearing.
That hearing is your chance to explain why your registration should not be revoked. If you want to show that your license should not be revoked successfully, be ready to prove that you have rectified whichever issues led to the initial notice.
How Revocation Can Affect Your Business
Loss of your certificate can affect your business in a variety of ways. To start, you can no longer legally collect sales tax. This means that you can no longer conduct taxable transactions, which means an immediate loss of income for most businesses. If you do continue to do business, you face additional fines and penalties as a result.
Not having a sales tax certificate can also keep you from getting other certifications or licenses you need for your business to operate. For example, if you need an alcohol or tobacco license, not having a sales tax certificate will likely prohibit you from getting one. You’ll also run into roadblocks if you have to get a sales tax certificate for your city or county for a local business permit.
Vendors may no longer be able to sell to you if you cannot provide a valid sales tax certificate, and your financing sources may be cut off if you cannot prove that you are running a legitimate business in Georgia.
Penalties and Other Enforcement Actions
The Department of Revenue could hit you with significant penalties if you lose your sales tax certificate and continue to operate. To start, you still owe any unpaid taxes that may have led to the original loss of your certificate. Interest and penalties will continue to accrue until that debt is paid. The state may also file a Notice of State Tax Execution. This state tax lien asserts the state’s right to your business assets until you pay off the debts associated with it.
If a business continues to operate in violation of the law, the Department of Revenue may take additional steps to force it to cease operating as normal. Cease-and-desist notices and site visits that aim to shut the business down until it has a legitimate sales tax certificate are common.
Just as sales tax certificate revocation can keep you from getting other important licenses, it can also cause you to lose the licenses you already have. A business may lose the right to sell alcohol, tobacco, lottery tickets, and other state-regulated items. It may also lose the right to operate in its local area.
When Penalties Escalate
In most cases, penalties stop at the ones listed above. However, if a business owner operates in flagrant and willful violation of the law, the state may choose to go further and pursue criminal charges. This is typically reserved for businesses with massive tax liabilities that have a consistent record of evading their taxes and filing returns late or not at all.
The Department of Revenue is very good at flagging signs of potential fraud and abuse. A business caught submitting fake invoices or falsified records often warrants further investigation, as do businesses that have been without tax filings for long stretches of time. Responsible parties may ultimately be responsible for unpaid taxes, penalties, and interest.
Not only may these issues lead to penalties at the state level, but egregious and high-level fraud may warrant criminal investigation by the IRS. Please remember that these outcomes are very rare. The Department of Revenue takes steps to separate willful and non-willful violations. Many business owners occasionally fall behind and do their best to catch up; this is an entirely separate situation from business owners who abuse the system and exploit loopholes to benefit financially.
Take Swift Action to Address the Revocation
The Department of Revenue does reinstate sales tax certificates, but only when the underlying issues are resolved and the business is back in full compliance with state tax laws. To get your certificate back, review the issues outlined by the Department of Revenue and take steps to rectify them immediately. These steps may include:
- Filing all late returns
- Paying all taxes associated with late returns
- If payment in full is not possible, setting up an installment agreement or applying for an offer in compromise may allow you to catch up and become compliant
- Prove to the DOR that you will comply in the future if you have a history of non-compliance; this may include explaining changes you’ve made in staffing, tax protocols, and documentation
- Providing all requested financial records to prove that you have not misused state funds
Real-Life Examples: How Businesses Lose Their Licenses
There are certain patterns that show up again and again when you look into tax issues. While any business can lose its sales tax certificate, many of them fall into one of these categories:
- Seasonal businesses that fall behind on filing and payment requirements during a slow season and never catch up, due to the cyclical nature of their business and the demands on their time
- For businesses without sales, owners often mistakenly believe that having no sales means that no return is needed, which is not the case in Georgia. If you have a sales tax permit, you must file a return for every tax period, whether monthly, quarterly, or annually.
- Businesses in high-risk industries such as restaurants, convenience stores, and laundromats may be audited and subsequently face penalties that lead to license revocation.
- Hands-off owners who entrust their tax filings and payments to an accountant who is not compliant with DOR requirements
- Fraudulent business owners who intentionally and knowingly submit false returns, hide sales, or otherwise defraud the Department of Revenue.
The sales tax certificate is not the only permit that the state can rescind. If you have a liquor license, the DOR can revoke it for unpaid state taxes.
Why Working With a Tax Professional is Crucial
Any time you run into tax issues, you have the freedom to consult a tax professional and get clarification or guidance. However, it is especially important to turn to a tax professional when your business’s sales tax license has been revoked. This certificate is necessary for the financial stability of your business.
Being unable to sell taxable goods or services can grind your business to a halt in a matter of days, and you have to take action quickly to fix any related issues and request reinstatement of your license. Your tax attorney can review the issues that initially led to revocation, work to repair all deficiencies and issues, and then negotiate with the DOR on your behalf to get your license back.
At the same time, you want to avoid saying anything to the Department of Revenue that could harm your case. Your attorney can handle communication with the Department of Revenue to help you avoid unintentional incrimination.
From proving that your license should not be revoked to fighting for reinstatement and appealing unfair charges, your tax attorney can advocate for you in a variety of ways.
If your sales tax certificate has been revoked or is at risk of revocation, protect your business now. Ensure that you can continue operating uninterrupted with the help of the team at Wiggam Law. With our extensive knowledge of Georgia tax law and DOR regulations, we can work on your behalf to keep your business running smoothly. Call us at (404) 233-9800 or reach out online to find out how we can help you.
Frequently Asked Questions
Can I keep operating if my sales tax certificate is revoked in Georgia?
You cannot legally collect sales tax without a sales tax certificate. However, you also cannot conduct transactions of taxable items without collecting sales tax, so this stops those aspects of your business from running.
How do I get reinstated after a GA DOR revocation?
You can seek reinstatement after fixing the issues that first caused you to lose your license. You may want to work through this with a tax attorney who can negotiate with the DOR and address any chronic payment or filing issues you’ve had.
What if I can’t afford to pay what I owe?
You may qualify for an installment agreement or offer in compromise, depending on your financial means and circumstances.
Is there a way to settle with the DOR for less than I owe?
An offer in compromise allows some taxpayers to settle for less than they owe, but this is rare for sales tax and almost unheard of for businesses that are still in operation. Your application can only be approved if you meet specific financial parameters.
Will the GA DOR notify my local city or county if I lose my certificate?
The GA DOR may notify other agencies that require sales certificates of a business’s revocation. Additionally, since your license is tied to your business’s EIN, other agencies may learn about revocations that way.
Sources:
- https://dor.georgia.gov/taxes/sales-use-tax/how-do-i-know-if-i-need-collect-sales-use-tax
- https://dor.georgia.gov/sales-and-use-tax-faq
- https://dor.georgia.gov/taxes/business-taxes/sales-use-tax/sales-and-use-tax-registration-faq
- https://dor.georgia.gov/change-sales-tax-certificates
- https://www.law.cornell.edu/regulations/georgia/Ga-Comp-R-Regs-R-560-12-1-.37
- https://law.justia.com/codes/georgia/title-14/chapter-11/article-7/section-14-11-709/
- https://rules.sos.ga.gov/gac/560-12-1
- https://www.atlantaga.gov/home/showpublisheddocument/60234/638709061240970000
- https://www.atlantaga.gov/government/departments/finance/office-of-revenue/apply-for-a-new-business-occupational-tax-certificate
