The title of this article suggests one thing — that the traditional “nexus” of physical presence and/or substantial and continuous contact no longer solely defines a tax obligation in Georgia.
What is Economic Nexus in Georgia?
Having an economic nexus with Georgia requires an out-of-state seller to make gross sales worth $250,000.00 to residents of Georgia.
For example:
- Your principal place of business is Massachusetts, where your brick-and-mortar building is located or you are at least registered to do business.
- You sell $251,000.00 worth of hairspray bottles to residents of Georgia.
Congratulations, you now have an economic nexus to the state of Georgia and are required to collect and remit sales tax to the Georgia Department of Revenue.
Are Services Subject to Sales Tax in Georgia?
The second question is whether services are subject to sales tax. This has always been a crushing question for businesses.
General Rule:
- Generally, services are not subject to sales tax.
Exception:
- However, when services are coupled with a tangible item, they are and will be subject to sales tax.
- The tax is levied on the gross receipt, not the segregated amount of services versus tangible item.
Summary of Key Points
- Physical presence is no longer necessary to create nexus in Georgia.
- $250,000.00 in gross sales triggers economic nexus.
- Tangible products paired with services are taxable on the total gross receipt.
Frequently Asked Questions
What is economic nexus in Georgia?
Economic nexus in Georgia is triggered when an out-of-state seller exceeds $250,000.00 in gross sales to Georgia residents within the current or previous calendar year. Once this threshold is met, the seller must register, collect, and remit sales tax to the Georgia Department of Revenue.
Does a business need a physical presence to have a tax obligation in Georgia?
No. Georgia no longer requires a business to have a physical presence, such as an office or employees in the state, to establish nexus. Economic activity alone, such as surpassing the $250,000.00 gross sales threshold, can create a tax obligation.
Are all services taxable in Georgia?
Generally, no. Most standalone services are not subject to sales tax in Georgia. However, if a service is sold together with a tangible product, the entire transaction becomes taxable.
How is sales tax calculated when services and goods are bundled?
When a service is provided in conjunction with a tangible item, sales tax is applied to the total gross receipt of the sale. Georgia does not allow sellers to separate and exclude the service portion from taxation in such cases.
What should remote sellers know about tax compliance in Georgia?
Remote sellers should monitor their sales into Georgia to determine if they cross the $250,000.00 threshold. If they do, they must register with the Georgia Department of Revenue, collect applicable sales tax from buyers, and remit it as required by law.