What Is Use Tax in Georgia and How Does It Work?
Navigate Georgia's use tax to understand your obligations for items purchased out-of-state but used within Georgia. Ensure proper state tax compliance.
Use tax serves as a complementary tax to sales tax, designed to prevent consumers from avoiding taxation on purchases made outside a state’s borders. It ensures that goods and services consumed within a state are subject to a uniform tax burden, regardless of where they were acquired. In Georgia, use tax applies when a taxable purchase is brought into the state for use, storage, or consumption, and Georgia sales tax was not collected by the seller at the time of purchase.
When Georgia Use Tax Applies
Georgia’s use tax applies to tangible personal property and certain services purchased outside the state but then used, stored, or consumed within Georgia. This often includes purchases made online or through mail-order from vendors who do not collect Georgia sales tax. For instance, if an individual buys furniture from an out-of-state online retailer that does not charge Georgia sales tax, and then brings that furniture into Georgia for their home, use tax would be owed.
Businesses also incur Georgia use tax liability on items like office supplies, equipment, or machinery acquired from out-of-state vendors that did not collect sales tax. A contractor purchasing a bulldozer in another state and later bringing it to Georgia for a job would owe use tax, for example. If an item would be subject to sales tax if purchased within Georgia, it will be subject to use tax if purchased elsewhere and brought into the state.
Calculating Georgia Use Tax
Calculating Georgia use tax involves applying the same rate that would have been charged if the purchase occurred within the state. This rate includes the statewide sales tax of 4% plus any applicable local option sales taxes, which can vary by county or city, resulting in combined rates ranging from 6% to 9%. The use tax is calculated on the total purchase price, including any shipping and handling charges. For example, if an item costing $1,000 is subject to a combined state and local use tax rate of 7.75%, the use tax owed would be $77.50.
If sales tax was paid to another state on the purchase, Georgia law allows a credit against the Georgia use tax to prevent double taxation. This credit cannot exceed the amount of Georgia use tax due. For instance, if an item was purchased in another state with a 6% sales tax, and the Georgia combined use tax rate for the purchaser’s location is 7%, the purchaser would still owe the remaining 1% difference to Georgia. The Georgia Department of Revenue may require proof of sales tax paid in the other jurisdiction to grant this credit, as outlined in Georgia Code Section 48-8-90.
Reporting and Paying Georgia Use Tax
Individuals report and pay Georgia use tax on their annual Georgia income tax return, specifically Form 500 or Form 500-EZ. Individuals also have the option to make a one-time payment directly through the Georgia Tax Center website.
Businesses report and pay use tax through their regular sales and use tax returns, Form ST-3. These returns are filed periodically, such as monthly, quarterly, or annually, depending on the business’s tax liability and filing frequency assigned by the Georgia Department of Revenue. The due date for sales and use tax returns is the 20th day of the month following the reporting period, and electronic filing through the Georgia Tax Center is often required, particularly if the tax liability exceeds $500.
Common Exemptions from Georgia Use Tax
Georgia law provides specific exemptions from sales and use tax, meaning that if an item is exempt from sales tax, it is also exempt from use tax. Certain food and food ingredients sold for off-premises consumption by an individual consumer are exempt from the 4% state sales tax, though they may still be subject to local sales and use taxes. Prescription medications and certain medical devices are also exempt from Georgia sales and use tax.
Other exemptions include qualified machinery and equipment used directly in manufacturing processes, as well as certain agricultural equipment like tractors and irrigation systems. Sales to governmental entities, when paid for directly by government funds, are exempt. Sales to qualified non-profit organizations are exempt, provided they present a valid exemption certificate. Tangible personal property purchased for resale is exempt if the purchaser provides a valid resale certificate.