Georgia Sales Tax On Labor
The basis for a taxable sales price for an item sold in Georgia includes the cost of materials used and the labor.
1) GDOR separates labor into different categories, so let’s define each category. The most common types of labor are repair, installation, and fabrication labor, defined as follows:
- Repair labor is labor to repair or restore an item to its original form
- Installation labor is labor to affix, connect, or make an item ready for use
- Fabrication labor is labor to make a new item or change an existing item into a new item
2) Is the type of labor is clearly defined by the vendor? In Georgia, repair and installation labor for tangible personal property is exempt from sales tax WHEN IT IS separately stated from the material charges on an invoice.
3) IF fabrication labor is being provided, the entire charge will be taxable regardless of whether or not the labor charges are separately stated.
Example: If a vendor is charging you $1,000 to repair tangible personal property and bills you in a lump sum, you could pay as much as $70 in tax. If the labor is $700 and the material is $300, AND these charges are separated on the invoice, the tax charge will only be $700 X 7% sales tax – these sales tax savings will only increase with larger dollar invoices.
So what should you do if you have a repair or installation invoice for tangible personal property from a vendor that is just a lump sum? You can easily request a material/labor breakdown from the vendor; thus, making only the material charge taxable. As illustrated above, this can lead to big sales tax savings since labor is usually a much larger portion of an invoice.
Georgia Sales Tax On Labor
