In June 2018, the U.S. Supreme Court issued a landmark decision clearing the way for states to force collection of sales taxes from online sellers who have no physical presence in the taxing state.
Even before the South Dakota v. Wayfair case was decided, Georgia put a law in place to give it a jump on collections. Georgia HB 61, signed into law by Governor Deal in May 2018, requires remote sellers to collect and remit sales taxes on orders delivered in Georgia if a seller has:
- $250,000 in total of retail sales in the previous year or current calendar year; or
- 200 or more separate retail sales in the previous or current calendar year.
Sales are included in these calculations if the property is to be delivered electronically or physically to a location within the state, to be used, consumed, distributed, or stored for use or consumption in the state.
Department Of Revenue Provides Details
The Georgia Department of Revenue (DOR) has issued a Policy Bulletin explaining the obligations of remote sellers, including the reporting requirements for sellers who choose not to collect the tax.
Under the Georgia law, sellers are required to collect and remit Georgia sales tax. If they choose not to do that, they must notify buyers in Georgia that the buyers must file and pay a “use tax.” (Use taxes are imposed on and payable by buyers as an alternative to sales tax collections.) Sellers must send annual sales and use tax statements to buyers and also must file them with the Georgia Department of Revenue.
Identify Your Status Now
Remote sellers need to start working on their compliance with Georgia law immediately. Initially, remote sellers must determine whether they are likely to meet the thresholds in the Georgia law and become subject to the collection and notice rules.
If so, compliance tools need to be put in place to track all sales of tangible personal property from outside of Georgia that are to be delivered electronically or physically to a location within Georgia.
Collect Taxes or Kick it to Buyer
As noted above, if a remote seller that meets the above thresholds chooses not to collect and remit sales tax, the seller becomes subject to special notice and reporting requirements. The Policy Bulletin states that the seller must:
(A) Beginning January 1, 2019, give the following notice to each potential purchaser immediately before the completion of each retail sale transaction: “Sales or use tax may be due to the State of Georgia on this purchase. Georgia law requires certain consumers to file a sales and use tax return remitting any unpaid taxes due to the State of Georgia.”;
(B) send a sales and use tax statement by first class mail and separate from any other shipment to each purchaser who completed one or more retail sales with the seller that totaled $500.00 or more in aggregate during the prior calendar year in an envelope containing the words “IMPORTANT TAX DOCUMENT ENCLOSED” on the exterior on or before January 31, 2020 and each year thereafter; and
(C) file a copy of each required sales and use tax statement with the Georgia Department of Revenue On or before January 31, 2020 and each year thereafter.
Contents of Sales and Use Tax Statement
The statements must contain the following information:
- Total amount paid by the purchaser for retail sales from the seller during the previous calendar year
- Dates of purchases
- Amounts of each purchase
- Category of each purchase
- Whether or not the purchase is exempt from taxation
The sales and use tax statement also must include the following notice:
“Sales or use taxes may be due to the State of Georgia on the purchase(s) identified in this statement as Georgia taxes were not collected at the time of purchase. Georgia law requires certain consumers to file a sales and use tax return remitting any unpaid taxes due to the State of Georgia.”
Penalties for Noncompliance
Failure to provide the pre-purchase notice carries a penalty of $5.00 for each failure. Failure to send a sales and use statement carries a penalty of $10.00 for each failure. Failure to file a copy of a sales and use tax statement described with the Department of Revenue carries a penalty of $10.00 for each failure. Clearly, the penalties for noncompliance can add up quickly.
If you are a remote seller and need guidance on Georgia’s upcoming sales tax requirements for electronic sales, consult your Frazier & Deeter state tax advisers.