If you sell taxable goods in Georgia, you must collect sales tax from your customers. Then, you must file and pay sales tax reports. Failure to stay compliant can lead to significant penalties and even the closure of your business.
This guide walks through Georgia’s sales tax regulations for collections, filing your sales tax return, what happens in an audit, and penalties to be aware of. When you need further assistance, work with the team at Wiggam Law for expert legal guidance on your business taxes.
Key Takeaways:
- Sales tax – Businesses have to pay sales and use tax in Georgia if they sell tangible personal property or services like accommodations, transportation, or event admissions.
- Rate – The sales and use tax is 4% for the state, plus the rate for whatever jurisdiction applies to your business.
- Permit – You first need to apply for a sales and use tax permit to start collecting sales taxes and making sales, which you can do through the Georgia Tax Center website.
- Sales tax collection – You must collect sales taxes on each transaction to remit to the state when you file your sales tax return.
- Compliance – If you miss a deadline or don’t pay what you owe, you could face steep penalties and even tax audits.
What Is Sales Tax in Georgia?
First, what does sales tax mean, and how does it impact your business? Sales tax is a tax that applies to some goods and services you may provide to customers. Businesses required to collect sales tax must remit what they collect to the state.
In Georgia, the state sales tax rate is 4%, but remember that you could also have to collect and pay local sales taxes, which range from 0% to 5%, depending on where your business is located. So, that means the sales tax rate may be up to 9% depending on jurisdiction.
What Is Use Tax?
The use tax is slightly different. When certain products are brought into the state of Georgia to be used for the first time, this tax may apply. Use tax also could apply if sales tax wasn’t applied at the point of sale. The use tax rate is the same as the sales tax rate.
For example, say you go to Pennsylvania and buy some supplies for your business, but you don’t pay sales tax as this state doesn’t have sales tax. In this case, you should note the purchase on your sales tax return and pay use tax on it.
You may also need to pay use tax on purchases with lower sales tax rates. For example, if you go to Florida and pay 6% sales tax on a purchase but you live in a district of Georgia with a 9% sales tax rate, you should report the purchase on your sales tax return and pay the difference of a 3% tax.
Who Must Collect Georgia Sales Tax?
Not all businesses, and not all goods provided, are subject to sales tax in Georgia. The law states that retail sales of tangible personal property are subject to the sales tax, but only some services sold. In general, most services aren’t taxable, but these are the exceptions:
- Accommodations
- Transportation in-state, including taxis
- Admissions
- Games and amusement tickets
If a service is provided in conjunction with a retail sale, such as a delivery fee, that is also taxed. Any business or individual providing eligible products and services must collect sales tax from the transaction and remit it to the state and local jurisdiction.
Determining Sales Tax Nexus
Another concept to know is called nexus, which helps you understand when you need to collect sales tax in Georgia. Nexus means that your business is physically located in the state or has an otherwise significant connection to it.
Physical nexus means that your business has a physical presence, such as a store or office, or potentially even inventory in the state. Economic nexus means that the business has either:
- Over $100,000 in gross revenue during the year, or
- At least 200 sales transactions during the year
Businesses with nexus in Georgia are required to collect and remit sales tax.
How to Start Making Sales in Georgia
There’s a set process in place for getting started with sales tax collection in Georgia. Follow these steps to get registered and in compliance:
Register for a Permit
First, you need to register with the state to be able to collect sales tax. Most of the time, you can initiate and complete this process online through the state’s Georgia Tax Center website. Go to Register a New Business Page, which will help you apply to be able to start collecting sales and use tax.
To apply online, you’ll need the following:
- Business name and address
- For LLCs, corporations, and partnerships, the business’s federal employer identification number (FEIN); you can get a FEIN through the IRS
- Social Security number or individual taxpayer identification number (ITIN) if a sole proprietor
Once you have your information ready, follow the prompts in the system to provide business details and submit your registration application. You’ll also set up an account where you can view your information online. After registering, you should receive your account number via email, and you will then have instant access to your sales and use permit.
Note that the registration process is free, and you won’t have to worry about renewals.
Collect Sales Tax
Once you have your permit, you can start collecting sales tax from qualifying products and services transactions. Remember that on top of the 4% sales tax rate for the state, you’ll also have to collect the percentage that is applicable to your location or jurisdiction of the sales you’re making.
Some online platforms will build in the sales tax for you, so it’s automatically applied to your transactions. Point-of-sale (POS) solutions will help you ensure you apply the correct rate for in-person sales.
Everything you’ve collected for sales tax must be sent to the state. This means you need a process in place to save what you’ve collected safely until you remit it to Georgia.
File a Sales Tax Return
Your next step is to file a sales tax return with Georgia. Depending on your business’s size and the number of sales you make, how often you have to file will vary. Pay attention to the frequency the state assigns you when registering for a permit.
However, most sales tax returns are due by the 20th of the month following the end of the current reporting period, and they’re typically due every month unless you request otherwise.
Your sales tax return is where you report all taxable sales made, how much you collected, and where you collected it. You’ll use Form ST-3 or report through the Georgia Tax Portal, and the latter is required if you owe over $500 in sales and use taxes on your return.
Remit Collected Sales Tax
When you submit your sales tax return, you’ll also send in the money you collected in sales taxes for that period. However you file, whether using Form ST-3 or using the online system, is also how you’ll send in your payment. The easiest, fastest option is to do everything through the Georgia Tax Center.
What If You Don’t Comply with Georgia’s Sales Tax Laws?
Unfortunately, if you fail to comply with your sales and use tax obligations, your business will face consequences like tax audits and penalties:
Tax Audits
You could face a state tax audit if you provide inaccurate information or you don’t report or pay what you owe in sales and use taxes. Audits can be time-consuming and stressful, so ensure you’re always in compliance to avoid a tax audit, which can put a strain on your business.
Tax Penalties
Georgia also imposes tax penalties specific to sales and use tax issues. Here’s a brief overview:
- Failure to file penalty: If you miss the filing deadline, you could see this penalty, which is 5% of the taxes owed or $5, whichever is more, for each month you don’t file. The penalty won’t exceed 25% of taxes owed or $25, whichever is greater.
- Failure to pay penalty: Failing to pay by the deadline or pay the full amount will result in this penalty, which is also 5% or $5, whichever is more, for each month, not to exceed 25% or $25, whichever is greater.
- False or fraudulent return: If you commit fraud in your return or provide false information, you could have to pay a penalty of 50% of the taxes owed.
Note that the failure to file and pay penalties do not stack – the maximum penalty for both together is 25%. Any penalty is more money your business has to pay the state. So, you always want to stay compliant, provide accurate information, and file promptly to avoid missing a deadline.
Interest Charges
The state of Georgia also charges interest on unpaid taxes until your balance is completely paid off. The rate is 10.50% per month, which is the Federal Reserve prime rate plus 3%. This is a hefty charge that you can avoid by ensuring you never have an outstanding tax balance with the state.
Talk to a tax expert in Georgia about your options when you don’t understand sales tax laws or you need help paying what you owe.
Georgia’s Voluntary Disclosure Agreement Program
Georgia implemented the Voluntary Disclosure Agreement program to encourage taxpayers to pay what they owe. If you have unfiled or unpaid taxes with the state, this may be a good option to get some relief.
Here’s how to qualify:
- You haven’t been contacted yet about your unfiled or unpaid taxes by the state’s Department of Revenue.
- You’re in good standing with all your other Georgia tax obligations.
You then need to submit an application to apply for the program. If you’re approved, you will usually be granted a penalty waiver and a limited look-back period for state tax assessments. Note that even if penalties are waived, you’ll still have to pay accrued interest.
If you qualify, the look-back period will generally be limited to three years. However, if you collected sales tax that you didn’t remit to the state, the look-back period will extend throughout that time frame.
You can submit your application on the state tax website if you qualify.
When to Get Help from Wiggam Law
Sales and use tax obligations may seem overwhelming, especially when you’re just starting your business. However, understanding Georgia’s tax laws, as well as how to comply with the IRS, is key to staying in good standing and avoiding costly penalties.
When you need help registering your business in Georgia, addressing unpaid business taxes, applying for the voluntary disclosure program, or collecting and remitting sales tax, we’re here to help at Wiggam Law. Our team helps both businesses and individual taxpayers resolve their tax issues and negotiate with the IRS.
Schedule a consultation with Wiggam Law today.
FAQs About Sales and Use Tax in Georgia
Do I Have to Collect Sales Tax in Georgia?
If you sell products or services subject to sales tax in Georgia, you’re required to register for a sales and use tax permit and collect and remit taxes to the state. Retail of personal property is taxable, and while most services aren’t taxable, services like transportation or event tickets are.
You may also have to collect Georgia sales tax if you’re based out of state but have enough sales (20 transactions) or a high enough volume of sales ($100,000) to qualify for economic nexus.
How Do I Get a Sales Tax Permit?
You can register easily using Georgia’s online tax system — the Georgia Tax Center. Just have your tax ID numbers and your business information ready.
When Do I Have to Pay Sales Taxes in Georgia?
Many businesses are required to file a sales tax return and remit payment monthly. Your frequency and monthly deadlines will be assigned to you when you register for a permit online.
Will I Be Penalized If I Miss a Sales Tax Deadline?
As with any tax deadlines and obligations, missing your sales and use tax payment or filing deadline will result in penalties and building interest. You may have to pay the failure to file and/or failure to pay penalties, and interest will accrue until your balance is paid off.
What’s Georgia’s Voluntary Disclosure Agreement Program?
You could qualify to get your penalties waived by applying for the state’s Voluntary Disclosure Agreement Program. You must be up to date on your other tax obligations, and you can only qualify if you haven’t yet been contacted by the state about the outstanding taxes.
For further guidance, call us at (404) 233-9800 or use our contact form to request a consultation.