Overview
In an effort to stay current with the latest changes in Georgia sales tax rules and regulations, this article provides a briefing on the topic of resale certificates.
Resale certificates are provided to vendors who purchase goods at wholesale prices with the intention of reselling those items to the end user. It’s important to note that the “end user” isn’t necessarily the general public; a business entity can also be considered the end user. However, the Comptroller has been issuing varying guidance on this matter.
Real-World Audit Cases
Case A – Shipping Company
Client A was audited for sales tax. They are a shipping company selling goods to overseas companies. All goods were shipped with a bill of lading, indicating export from the Gulf of Mexico to various countries abroad.
However, the State asserted that some of the products, although intended for export, were being consumed by the ship crew on board. Therefore, those goods should be considered taxable.
Case B – Seller of Gloves
Client B was audited for sales tax. They supply gloves and similar equipment to car dealerships and other vendors.
The State argued that because the dealerships use the gloves for their mechanics during vehicle repairs, the dealership itself is the end user. Despite the dealership providing a reseller’s certificate, the State’s position is that our client was responsible for collecting the sales tax on transactions involving gloves.
Case C – Expired Certificates
Client C was audited for sales tax and had expired sales tax certificates on file. Some buyers had either been out of business for years or had not renewed their certificates.
In these cases, the State’s position was that our client was responsible for failing to secure adequate resale certificates. The burden ultimately falls on the entity being audited.
Case D – Sales Tax Certificates of a Sister-Concern Company
Client D was audited for sales tax and submitted a sales tax exemption certificate for a sister-concern company (an affiliate of the customer).
The State deemed this inadequate. If Business D is conducting business with Business M, it must possess a resale certificate from Business M. Business D cannot use the resale certificate from Business N, even if there is a corporate relationship between Business N and Business M.
Key Takeaway
Georgia resale certificates are crucial in every sales tax audit. Auditors typically request these certificates at the very start of the audit process, highlighting their importance.
If any of these situations apply to your business, contact us to discuss your sales tax structure or audit preparation.
Frequently Asked Questions
What is a Georgia resale certificate and who can use one?
A Georgia resale certificate allows businesses to purchase goods tax-free if the intent is to resell those items. Both public-facing retailers and B2B businesses can use these certificates, but proper documentation is critical.
Can a business be considered the end user even if it provides a resale certificate?
Yes, if the purchased goods are used in operations rather than resold, the business is considered the end user. For example, gloves used by mechanics in a dealership are not resold and thus become taxable.
Are expired resale certificates valid during a sales tax audit?
No, expired resale certificates are considered invalid. The business under audit is responsible for maintaining current and valid certificates for all applicable transactions.
Can a company use a resale certificate from an affiliated or sister company?
No, each transaction must be supported by a valid resale certificate from the specific purchasing entity. Affiliations or corporate relationships do not make substitute certificates acceptable.
Why are resale certificates so important in a Georgia sales tax audit?
Resale certificates are often the first documents requested by auditors. Failing to provide accurate and up-to-date certificates can result in tax liabilities, even if the intention was resale.
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