Transcript ACCOUNTANTS ONE CPE

Georgia’s new sales and use tax Regulations
May 12, 2010
WHERE WERE WE?
 Exemption required that machinery be used for the
first time in the state or an upgrade to productive
capacity
 Required machinery to be used directly in the
manufacture of TPP for ultimate sale at a fixed
location
 Dual Operator admin/audit procedures
 Pollution control equipment had to be incorporated
into facility and approved by GA regulatory agency
WHERE DID WE GET TO?
 Vast expansion of the manufacturing machinery
clarification and overall exemption
 Removal of restrictive phrases such as “incorporated
into a facility,” “used directly,” and “for ultimate sale”
 New definitions for key terms resulting in exemptions
on additional property previously considered taxable
 Achieved one of the most beneficial exemptions in the
country for manufacturing companies
 Defined who qualifies as a manufacturer with flexible
language allowing new technology / processes
HOW DID WE GET THERE?
 Initial legislation introduced to the House Ways and Means Sub-
Committee on Sales Tax in 2007 highlighting differences in
Economic Development Board’s interpretation on tax
exemptions vs. the Ga Dept. of Revenue’s interpretations used to
conduct compliance audits
 Legislation signed into law by Gov. Perdue in May 2008
 Four Public Hearing sessions conducted starting in February
2009 drafting Tax Regulation which was ultimately adopted in
October 2009 (1st instance of significant Taxpayer interaction)
 Significant participation and leadership came from GTMA, GA
Paper & Forest Products Assoc., GA Mining Assoc., GA Poultry
Assoc., and many industry participating companies
§ 48-8-3 Exemption
 Machinery & equipment - necessary & integral
 Primary material handling equipment
 Repair & replacement parts – necessary & integral
 Industrial materials – coated & impregnated
 Pollution control machinery & equipment
Reg. Sec. 560-12-2-.62
 Defines manufacturer & manufacturing of TPP
 Defines consumable supplies – broad
 Defines industrial materials
 Defines machinery & equipment broadly
 Defines packaging operations
 Defines repair parts
MANUFACTURING DEFINITION
 Manufacture of tangible personal property means a manufacturing operation,
series of continuous manufacturing operations, or series of integrated manufacturing
operations, engaged in at a manufacturing plant or among manufacturing plants to
change, process, transform, or convert industrial materials by physical or chemical
means, into articles of tangible personal property for sale or further manufacturing
that have a different form, configuration, utility, composition, or character.
 Removal of phrase “for ultimate sale”
 Such term includes, but is not limited to, the storage, preparation, or treatment of
industrial materials; assembly of finished units of tangible personal property to form a
new unit or units of tangible personal property; movement of industrial materials and
work in process from one manufacturing operation to another; temporary storage
between two points in a continuous manufacturing operation; random and sample
testing that occurs at a manufacturing plant; and a packaging operation that occurs at
a manufacturing plant.
COULD YOU BE A MANUFACTURER?
 To be considered a manufacturer, the person or business, or the
location of a person or business, must be:
Classified as a manufacturer under the 2007 North American Industrial
Classification System Sectors 21 (Mining, Quarrying and Oil and Gas
Exploration), 31 , 32, or 33 (Manufacturing); or specific North American
Industrial Classification Systems codes 22111 (Electric Power
Generation), or 511110 (Newspaper Publishers); or
 Generally regarded as being a manufacturer.
 Businesses that are primarily engaged in providing personal or professional
services, or in the operation of retail outlets, generally including, but not
limited to, grocery stores, pharmacies, bakeries, or restaurants, are not
considered manufacturers.

WHAT WILL QUALIFY
(generally)
 Machinery & equipment (“M&E) transporting industrial materials, supplies,
and packaging materials among different manufacturing plants.
 M&E to gather, arrange, heat, cool, or treat industrial materials
 M&E to produce energy for other machinery necessary and integral
 Testing and QC located at mfg plant
 Wiring, circuits, piping, conduit and electrical components
 M&E used to maintain, clean, or repair exempt M&E
 Safety equipment in the manufacturing plant
 M&E used to condition air or water to produce conditions necessary to mfg
 M&E used in quarrying and mining
 Multi-purpose M&E qualifies if its substantial purpose exceeds 33%
WHAT WILL NOT QUALIFY (generally)
 Motor vehicles
 Power lines or transformers that bring electricity into mfg plant
 Real property and fixtures
 Storage tanks using for finished goods (unless exempted by another code sect)
 Administrative machinery – Office computers, telephones , fax
 M&E not operated under the control of the manufacturer’s employees
 M&E used in quarrying and mining for site preparation – clearing overburden
 Living organisms of any kind
 Chep pallets
 Portable toilets
REFUNDS
 3 year statute still applies
 Jan 1, 2009 – Current; you need to quantify and file
refund claims under new law
 Information Bulletin SUT 2009-10-28
 A refund of sales and use taxes may be requested by submitting a Claim for Refund
(Form ST-12) and a Waiver of Vendor’s Rights (Form ST-12A) as applicable, in the
form and within the time limit provided in O.C.G.A. § 48-2-35. Any sales and use tax
that is later determine to have been paid in error shall be refunded with interest
subject to the provisions in O.C.G.A. § 48-2-35 and §48-2-35.1.
 Window of opportunity for credits on returns has
closed unless credits were taken in 4th quarter 2009
REFUNDS (Cont.)
 Different methodology for refunds of vendor paid tax
vs. use tax self remitted
 If using percentage based reporting, recalculate
percentage to quantify refunds
 Will not pay interest on refunds if certificate wasn’t
administered properly
 Refunds based on sampling methodology not allowed
without prior written agreement from Compliance
Division
PURCHASING & TDM Changes
 Work with vendors and send them proper exemption
certificates
 Change your AP processes
 Change to manual processes
 Use of bolt-on software TDM updates and mapping
 Use of outsourced provider
AUDIT CONSIDERATIONS
 Three year statute of limitations will most likely straddle the prior tax
law and the new tax law.
 The following factors should be considered when entering into audits
which cover reporting periods impacted by tax law changes:
 Audit Sampling Techniques
 Stratified Sampling Procedures
 Block/Time Frame Samples
 “True up” audits based on prior audit findings
 Managed Audits
 Items Withdrawn from Tax-Paid Inventories
 Leases executed under prior law which continue into new tax law
periods
 Impact of credits/refunds projected within sample methodologies
GENERAL SALES/USE TAX
 What is a sales tax?
 What is a use tax?
 SSTP
 Nexus
 Amnesty
 Voluntary disclosure
 Software treatment