What Is Tax 1 and Tax 2 on My Receipt in Georgia?

Many consumers in Georgia encounter “Tax 1” and “Tax 2” or similar labels on their receipts, often leading to confusion about the various charges applied to their purchases. These labels represent different taxes that businesses are required to collect and remit to state and local governments. Understanding what these common tax lines signify can help clarify the total cost of goods and services. This article aims to demystify these charges, providing insight into the tax structure in Georgia.

Understanding Georgia Sales Tax

Georgia levies a statewide sales tax, which serves as the foundational “Tax 1” on many receipts. This state sales tax rate is 4% of the retail sales price. It applies broadly to the sale of tangible personal property. Certain services are also subject to this state sales tax, including some repair and maintenance services, telecommunications services, and specific digital services.

However, not all purchases are subject to the state sales tax. Georgia law provides several exemptions. For instance, most unprepared food items, or groceries, are exempt from the state’s 4% sales tax when purchased for off-premises consumption. Prescription drugs, medical equipment, and certain medical devices are also exempt from sales taxes in Georgia.

Local Option Sales Taxes

Beyond the statewide sales tax, local jurisdictions in Georgia impose their own sales taxes, which frequently contribute to the “Tax 2” line on a receipt. These local taxes are added to the 4% state sales tax, resulting in a combined rate that can vary significantly depending on the specific county and city where the transaction occurs. The total sales tax rate in Georgia, including state and local components, can range from 4% to 9%.

Common types of local option sales taxes include the Local Option Sales Tax (LOST), Special Purpose Local Option Sales Tax (SPLOST), and Homestead Option Sales Tax (HOST). LOST revenues go into the general fund of local governments and are used to reduce property taxes. SPLOST, conversely, is a voter-approved, time-limited tax for funding capital outlay projects, such as roads, bridges, schools, and public facilities. HOST is a type of SPLOST that allows a county to increase the homestead exemption for property taxes.

Other Common Georgia Transaction Taxes

Other transaction taxes may appear as separate line items on a receipt. These taxes apply to certain services or goods and are distinct from general sales tax. For example, hotel/motel taxes are levied on charges for rooms or lodging. Cities may impose an excise tax ranging from 3% to 8% on these charges, and there is also a statewide $5 per night hotel-motel fee.

Rental car taxes are another common example, with a local excise tax of 3% applied to rentals for 31 days or fewer. Some municipalities and counties may impose food and beverage taxes, an additional 1% to 3% sales tax, on items sold in restaurants and similar establishments. These specialized taxes contribute to receipt complexity, potentially appearing as additional lines or combining with “Tax 1” and “Tax 2.”