There are strict laws regarding how Georgia businesses collect and pay sales and use tax. To make matters even more complicated, these laws are frequently changed and updated — and not knowing about changes to the laws is not a defense for breaking them.
Companies found to be collecting or paying the incorrect amount of sales tax face stiff penalties, which is why it’s so important to work with experienced sales tax attorneys in Georgia if you’re facing tax issues. To help you out, we’ve put together this guide with the basics and tips on when to contact a sales tax attorney.
What is Sales Tax in Georgia?
The state of Georgia imposes taxes on the sale of tangible personal property and some services. Taxes are based on the retail price of goods and services.
Note that most services are exempt from sales tax. Some taxable services include in-state transportation like taxis and limos, sales of admissions, and participation in games and amusement activities.
What is Use Tax?
Non-exempt items that are brought into Georgia may incur use tax. In Georgia, a use tax is imposed when non-exempt property purchased outside the state is first used, consumed, distributed, or stored in Georgia. Additionally, use tax is owed when someone buys a taxable good or service in Georgia but does not pay the necessary taxes on it.
Use tax is often owed when someone purchases something online and does not pay sales tax at the point of sale. Once the item is delivered to the individual in Georgia, they owe use tax.
Recent Changes to Georgia’s Sales and Use Taxes
It’s important to note that while sales and use tax is essentially settled law, it does frequently change. For example, in September of 2023, revenue from arcade machine leases was determined to be exempt from sales and use tax. As a business owner and taxpayer, it’s important to be aware of these changes and how they may affect you.
How Sales and Use Tax Works
Sales tax is based on the retail price of an item or service. It’s also charged on anything required by the retailer to complete the sale. Consider an online shop that charges a shipping fee. Taxes would be based on the retail price of the item plus what the purchaser must pay to have it shipped.
Currently, state sales tax is 4% in Georgia, but there may also be county or city tax on top of this amount. Business owners must also be aware of local municipalities’ sales taxes. For example, as of 2024, the sales tax rate in Atlanta (both DeKalb and Fulton Counties) is 8.9%. This rate includes the state sales tax of 4% plus 4.9% for local sales taxes. However, in DeKalb County outside of Atlanta, the rate is only 8%.
When a business owner collects sales tax, they are essentially acting as an agent of the state of Georgia. They are simply meant to collect taxes from customers and pass the money to the state. Companies are obligated to collect and manage taxes appropriately, and when they fail to maintain proper documentation or make those payments to the state of Georgia, issues will arise.
There are consumers who are exempt from paying sales taxes. Retailers are obligated to get an exemption or resale certificate from each buyer who claims to be exempt from sales tax. Failing to maintain this documentation can cause significant issues during an audit.
How Sales and Use Tax is Paid
You are required to collect sales tax at the point of sale. Most business owners choose to file their sales electronically via the Georgia Tax Center, and in fact, most business owners are required to file and pay electronically — the state requires anyone owing more than $500 to file electronically.
For most businesses, sales tax returns must be submitted and paid by the 20th day of the month following the end of the sales period. There are some businesses that pay on a quarterly schedule. Most business owners must submit sales tax returns on a monthly basis. It’s important to note that a sales tax return must be filed for an active business even if no sales have been made or no taxes are due.
Maintaining proper records is key for a business owner. You should maintain your records for no fewer than three years, including records of sales and purchases, account books used to determine how much sales tax is due, invoices and other records of property subject to sales tax, and payment receipts.
Those who must pay over $60,000 in state sales taxes in one calendar year are then required to pay prepaid estimated taxes the following year. This is equal to 50% of the estimated tax.
What Happens When You Don’t Pay Sales and Use Tax
Ideally, you’ll file and remit sales taxes on time every time without incident. Unfortunately, that’s not always how it works out. People fall behind, lose track of their account books, or fail to keep the taxes they owe separate from the company’s other funds. This can lead to major financial concerns, as the state will charge interest and penalties on the amount owed. Assuming you have a sales tax license, the state can rescind it if you do not file a sales tax return.
Interest and penalties on the amount owed can be a tough financial pill to swallow, but they aren’t even the worst possible outcome. A business owner who willfully and knowingly chooses not to follow sales and use tax laws can face severe punishment. They may face criminal penalties if they do not collect sales and use tax, file fraudulent sales tax returns, refuse to file a sales tax return, or do not keep tax records. Additionally, the Georgia Department of Revenue can assess the sales and use tax against the business owner or other responsible parties in the company and attempt to collect against their personal assets and income.
Under Georgia state law, a dealer who violates the law in this way faces a misdemeanor of a high and aggravated nature. This is punishable by a fine of up to $5,000 and up to one year in prison. Subsequent violations are considered felonies and may result in fines as high as $10,000 and up to five years in prison.
Please note that this is an extreme outcome and is reserved for those who willfully and egregiously violate Georgia’s tax laws. The majority of those who owe sales taxes or haven’t submitted sales tax returns are not doing so to violate the law intentionally. They end up in this situation via poor planning or bookkeeping, temporary financial struggles, or inexperience with Georgia sales tax laws. These situations can be remedied, and for many, one brush with the Georgia Department of Revenue is enough to put them on a strict and timely payment schedule going forward.
Options When You Fall Behind
If you have unfiled sales tax returns or owe sales tax payments, you may qualify for the Georgia Department of Revenue’s Voluntary Disclosure Agreement program. You may be eligible for this program if you meet the requirements, including:
- Have not yet been contacted by the Department of Revenue about the tax obligation in question
- Are compliant with other tax obligations outside the ones disclosed in the Voluntary Disclosure Agreement application
Applicants whose applications are approved receive a waiver of all penalties and have a timeframe in which they must pay previous liabilities and interest. The amount owed depends on the look-back period. The look-back period determines the time period for which you’ll have to pay delinquent taxes and interest. In general, this period is no shorter than three years. For sales tax issues, the look-back period depends on whether sales tax was collected or not. If it was collected but not deposited, the lookback period extends as far as necessary to cover all unpaid sales taxes. If sales tax was not collected, the lookback period is 36 months.
The Georgia Department of Revenue may also be open to an offer in compromise. This requires you to make a reasonable offer based on what is owed and what you can be expected to pay. Our firm has helped many people, including those with sales tax liabilities, successfully apply for an offer in compromise.
If you’ve already been contacted by the Department of Revenue about your failure to submit sales tax returns or pay sales taxes, you do not qualify for the VDA. At that point, you’ll likely need to work directly with the Department of Revenue to pay the taxes you owe, in addition to any imposed penalties and interest.
Benefits of Working With Wiggam Law
When you’re facing tax issues, you want an attorney who is dedicated exclusively to taxation problems. At Wiggam Law, we only take tax-related cases. Our focus on federal and Georgia state tax law has given us an in-depth understanding of the various issues our clients face — as well as the experience and knowledge needed to address them.
We understand that, as a business owner, you need to stay in business to take care of your family and pay your employees. Falling behind on your sales tax payments and catching the attention of the Department of Revenue can put your business in very real danger.
Our team will investigate your current sales tax situation, explain your options, and help you find a path forward. If you’ve already been contacted by the Department of Revenue, we’ll work urgently to secure a fair and favorable outcome that allows you to continue operating without issue.
Take charge of your sales tax problems. Call us at (404) 233-9800 or reach out online to schedule your case consultation today to see how we can help you get your business taxes back on track.