Georgia Tax Exemptions
Saving money for business growth and expansion allows Georgia companies expand and profit. Tax exemptions help small and large companies reduce upfront costs on business purchases and maintain a healthy inventory.
SALES TAX AND USE TAX EXEMPTION
Georgia helps companies lower their cost of doing business by offering the ability to purchase various types of goods and services tax free. These sales tax exemptions are defined in O.C.G.A. § 48-8-3 and several key exemptions are outlined below.
Manufacturing Machinery & Equipment – Manufacturing machinery and equipment that is integral and necessary to the manufacturing process and used in a manufacturing facility located in this state is exempt from sales tax. Qualifying machinery or equipment must be purchased for a new manufacturing facility, as replacement machinery in an existing manufacturing facility, or for the upgrade or expansion of an existing manufacturing facility. [Ga. Comp. R. & Regs. 560-12-2-.62]
Repair to Industrial Machinery – The sale or use of repair or replacement parts, machinery clothing, molds, dies, waxes or tooling for machinery which is necessary and integral to the manufacture of tangible personal property in a presently existing manufacturing plant is exempt from taxation.
Raw Materials and Packaging – Materials used for further processing, manufacture, or conversion into components of a finished product; materials coated upon or impregnated into a product being manufactured for sale; and non-reusable materials used to package products for sale or shipment may be purchased tax-free.
Energy Used in Manufacturing – The sale, use, storage, or consumption of energy which is necessary and integral to the manufacture of tangible personal property at a manufacturing plant in this state shall be exempt from all sales and use taxation except for the sales and use tax for educational purposes. This includes energy used directly or indirectly in a manufacturing facility.
Primary Material Handling Equipment – Machinery and Equipment used to handle, move, or store tangible personal property in a new or expanded distribution or warehouse facility where the total purchase or expansion is valued at $5 million or more is exempt. The distribution or warehouse facility may not have retail sales equal to or greater than 15 percent of the facility’s total revenues. [Ga. Comp. R. & Regs. 560-12-2-.103]
Pollution Control Equipment – Machinery & equipment used for the primary purpose of reducing or eliminating air and water pollution is exempt.
Computer Hardware and Software for High Technology Companies – The sale of certain computer equipment is exempt when the total qualifying purchases by a High Technology Company in a calendar year exceed $15 million. A High Technology Company must be classified under North American Industry Classification System code 334413, 334611, 51121, 51331, 51333, 51334, 51421, 52232, 54133, 54171, 54172, 513321, 513322, 514191, 541511, 541512, 511513, or 511519. [Ga. Comp. R. & Regs. 560-12-2-.107]
Clean Room Equipment – Machinery and equipment and materials used in the construction or operation of a clean room of Class 100 or less when the clean room is used directly in the manufacture of tangible personal property is exempt.
Water Costs – The sale of water delivered through mains, lines, or pipes is specifically exempt.
Telecommunications Services – Instate calls are taxed. Interstate calls are exempt.
INVENTORY TAX EXEMPTION
Business inventory is exempt from state property taxes (as of January 1, 2016). Almost all (93 percent) of Georgia counties and over 140 cities have adopted a Level One Freeport Exemption, set at 20, 40, 60, 80 or 100 percent of the inventory value. A Level One Freeport Exemption may exempt the following types of tangible personal property:
– Inventory of goods in the process of being manufactured or produced including raw materials and partly finished goods
– Inventory of finished goods manufactured or produced in Georgia held by the manufacturer or producer for a period not to exceed 12 months
– Inventory of finished goods on January 1 that are stored in a warehouse, dock, or wharf which are destined for shipment outside of Georgia for a period not to exceed 12 months.
Local governments can expand the Freeport Exemption and authorize a call for a referendum to approve the creation of a Level Two Freeport Exemption, which would exempt from local property tax any business inventory or real property not covered in the Level One Freeport Exemption, including retail inventory. Like the Level One Exemption, counties and municipalities may choose to implement a Level Two Freeport Exemption at the 20, 40, 60, 80 or 100 percent levels.