Understanding Taxable vs. Non-Taxable Items in Atlanta
If you are a grocery store owner in Atlanta, you might want to know what is taxable and non-taxable as a product.
For example:
- Is your grocery item truly a grocery item, or is it subject to the regular sales tax rate?
- Is a power bar truly a breakfast alternative to a glass of milk and an apple?
Not when it comes to sales tax.
Many of our convenience store and grocery store sales tax audits get tricky when the business owner considers their store to be more of a quick grocery stop rather than a convenience store.
What Does This Mean in Sales Tax Audit Language?
It means the store owner is not charging sales tax on everything that they should be charging sales tax on.
A Typical Sales Tax Audit Story
A client will call our office to speak about a sales tax audit.
- They have most of their books and records.
- However, the auditor is looking at levying very heavy penalties on sales tax that was not collected on non-grocery items.
- Since our client did not keep all of his books and records organized, you can’t really tell what part of a gross receipt is taxable.
Example:
A customer bought milk and cigarettes on the same bill. That creates confusion.
Since the auditor has already seen a number of books and records that were not properly recorded and the sales are not divisible, the auditor has chosen to estimate the non-taxable and taxable sales.
This Is Where We Come In
We step in to make sense out of the audit.
Georgia’s Sales Tax Rules on Food
Georgia does not require sales tax on food, but this exemption does not hold for any local (county, city, etc.) taxes.
Further, the exemption for “food and food ingredients” does not include:
- Prepared food
- Alcoholic beverages
- Dietary supplements
- Drugs
- Over-the-counter drugs
- Tobacco
Frequently Asked Questions
What grocery items are exempt from Georgia state sales tax?
Georgia exempts most “food and food ingredients” from the state sales tax. However, this does not include prepared foods, alcoholic beverages, dietary supplements, over-the-counter drugs, or tobacco products.
Are local sales taxes still applicable on exempt food items?
Yes, even though Georgia exempts certain food items from the state sales tax, local jurisdictions such as counties and cities may still apply their own sales taxes on these items.
How does the classification of a store affect sales tax obligations?
If a store operates more like a convenience store than a traditional grocery store, it may be required to charge sales tax on a broader range of products, including items that would typically be exempt in a grocery-only setting.
What are the risks of not properly categorizing taxable and non-taxable sales?
Improper categorization can lead to audits, penalties, and estimated tax liabilities. If sales are not clearly divided and documented, auditors may estimate taxable sales, often unfavorably for the business owner.
How can a tax professional help during a sales tax audit?
A tax professional can review records, clarify item classifications, and represent the business in negotiations with auditors. Their support is crucial in limiting penalties and resolving disputes effectively.