Overview
Beginning January 1, 2017, a direct pay permit cannot be used for the following types of purchases:
- Fuel subject to prepaid local tax
- Meals, beverages, or tobacco
- Local telephone services
- Lodging and rental charges for periods of 31 days or less for Georgia-titled motor vehicles
Definition of Direct Pay Permit
Pursuant to GA Reg. Sec. 560-12-1-.16, a “direct pay permit” is defined as:
“A permit issued by the Department of Revenue that allows the holder of such permit to accrue and pay state and local sales and use taxes directly to the Department.”
The concept of a direct pay permit was developed primarily to allow manufacturers to determine how a product will be used after purchase.
Simply stated:
The holder of a direct pay permit does not pay state and local tax at the time of purchase. Instead, use tax is accrued and paid to the appropriate state and local jurisdictions if the tangible personal property is used in a taxable manner.
Who Typically Uses Direct Pay Permits?
Direct pay permits are usually issued to manufacturers. However, the definition of a manufacturer extends beyond traditional manufacturing plants. Other businesses that may qualify include:
- Restaurants
- Grocery deli departments
- Software companies
(BTW – That may be worth exploring in your state…)
Amendments Effective January 1, 2017
Effective January 1, 2017, Reg. Sec. 560-12-1-.16 was amended to address:
- The definition of a direct pay permit
- Expiration dates of existing permits
- New application process and criteria for applying
Key New Provision
Taxpayers must now agree to waive interest on refunds of sales and use tax remitted for purchases made under a direct pay permit issued on or after January 1, 2017.
Expiration of Existing Permits
All current permits, letters, and certificates not issued through the Georgia Tax Center online application process will expire on December 31, 2016. These may no longer be used for nontaxable purchases after this date.
New permits effective January 1, 2017 or later must be issued through the Georgia Tax Center online application process.
Requirements for a Georgia Direct Pay Permit (Effective January 1, 2017)
To secure a direct pay permit in Georgia on or after January 1, 2017, the applicant must meet the following criteria:
Waiver Agreement
- The taxpayer must agree to waive interest on refunds of sales and use tax remitted for purchases made on or after January 1, 2017, without payment of tax to a vendor.
Purchase Volume
The taxpayer must have purchased more than $2 million of tangible personal property in the 12 months prior to the application.
Industry Classification
The taxpayer must be classified under specific NAICS codes.
Frequently Asked Questions
What is a direct pay permit used for in Georgia?
A direct pay permit allows qualified businesses to accrue and remit state and local sales and use taxes directly to the Georgia Department of Revenue instead of paying tax at the point of sale. This is especially beneficial for businesses needing to determine taxability after the purchase, such as manufacturers.
Which purchases cannot be made with a direct pay permit?
As of January 1, 2017, direct pay permits cannot be used for purchases such as fuel subject to prepaid local tax, meals, beverages, tobacco, local telephone services, and short-term vehicle rentals or lodging.
Who qualifies for a Georgia direct pay permit?
Businesses that purchase over $2 million in tangible personal property within 12 months and operate under specific NAICS industry classifications may qualify. Common eligible entities include manufacturers, restaurants, and software companies.
What are the new permit requirements effective January 1, 2017?
New requirements include applying through the Georgia Tax Center, agreeing to waive interest on sales/use tax refunds, and meeting updated eligibility criteria. All previously issued permits not obtained via the online portal expired on December 31, 2016.
Why do permit holders have to waive interest on tax refunds?
Effective 2017, as part of the updated regulations, applicants must waive the right to claim interest on refunds of tax remitted under the permit. This provision aims to streamline refund processes and ensure compliance with updated tax procedures.