Georgia Ruling on Contractor Purchases

In September 2015, the Georgia Department of Revenue (DOR) issued Letter Ruling: LR SUT-2015-12 that states a contractor purchasing materials to be incorporated into real estate as part of a contract owes state and local tax on the purchases. The ruling includes instances when the final destinations of the fabricated items are shipped outside of Georgia. It also addresses taxability when suppliers of raw materials are located outside the state and ship items to a contractor in Georgia.

The ruling confirms that if sales tax is not paid at the time of purchase, Georgia use tax is owed on the purchase price of the materials. The supplier can be located either within or outside the state. If the contractor assembles or uses the materials within the state, Georgia use tax is owed. Tax is also owed if the purchased items are constructed in Georgia and shipped for use in contracts outside the state.  

Tax is due on materials that are stored in Georgia and intended for use in fulfilling real estate contracts. This is true for items stored for future use at a Georgia location or in any other state.

The DOR addressed instances where a contractor pays sales or use tax on items intended for use in a real estate contract but ultimately resold as a retail sale. The contractor has 3 years from when they paid the tax to take a credit or request a refund from the DOR. The 3-year period only covers retail sales made within the state of Georgia. No credit or refund requests will be issued for retail sales made outside the state.

Items purchased by the contractor that are to be altered, changed, or customized and incorporated into real estate that is located within or outside of Georgia are taxable. The contractor as the buyer and end user assumes the responsibility for paying sales tax on these purchases.

If you are a contractor in the state of Georgia and need additional information or have a specific question, please feel free to contact tax@allynintl.com.

Tips for the Taxpayer

Stay up to date with rulings from your state and local taxing agencies, especially when they apply to your business activities. The taxpayer is responsible for paying tax on applicable purchases. Failure to pay sales or use tax could result in costly penalties and interest. 

For More Information

If you are interested in learning more about this topic or other tax topics, please visit our Tax Publications under News and Events at www.allynintl.com.

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Allyn files state and local sales and use tax returns in every US taxing jurisdiction. We can manage your tax compliance, create a solid tax process, and provide audit defense for your company.

Contact us and we can provide a customized cost-effective solution to meet your company’s needs. For further information on Allyn Tax services, please contact: tax@allynintl.com.

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