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Are "Sales Tax Free" Promotions Legal in Georgia?

author photo of Lauren Stinson

In today’s competitive marketplace, companies are constantly searching for new ways to attract customers. One popular sales tactic is offering to pay the sales tax for a purchase. Are companies allowed to make this promise to their Georgia customers?

In Georgia, as well as in most other states, sales and use tax is imposed on the seller, but it is required to be passed on to the consumer. The seller cannot absorb the sales tax because it can cause problems for both the seller and consumer. Since the transaction is a retail sale, the tax base should be the retail price, but if the seller absorbs the sales tax, they may be incorrectly remitting the sales tax based on the wholesale price.

Also, if the consumer is audited, they may not be able to prove that they paid the tax if it was absorbed by the retailer. Therefore, they may be assessed tax on the transaction, and the result will be double payment of tax as well as possibly having to pay interest and penalties.

In May 2012, legislation was passed that allowed “sales tax free” offers to be made but only if certain requirements are met by the retailer. First, the retailer must include in the advertisement that any portion of the tax not paid by the purchaser will be remitted by the retailer. Also, the retailer must furnish the purchaser with written evidence that the retailer will be liable for and pay the tax that the purchaser was relieved from paying.

So the next time you are tempted by those advertisements that say “pay no sales tax” or “tax free sale,” understand that you need some documentation to make sure you are covered!

Have you been involved with a "sales tax free" promotion? Do you have any words of wisdom for people considering this offer?

About the Author: Lauren Stinson,CMI, is Principal and National Leader - Sales & Use Tax at Cherry Bekaert LLP; a national CPA and consulting firm ranked as one of the top 25 in the country. Previously, Lauren was Owner and President of Windward Tax, a sales and use tax consulting firm. She has more than 25 years experience working with manufacturers on sales and use tax issues. Lauren is pleased to share her expertise with SalesTaxSupport readers as the Manufacturing contributor in SalesTaxSupport’s Industry blog, as well as the Georgia Sales Tax contributor in the States blog.

Comments or questions may be submitted by using the on-page "Comment" feature, subject to disclaimer at bottom of page. More specific questions or requests may be sent to Lauren directly using the orange "REQUEST" link on Lauren's Firm Profile page.

Other recent “Georgia (GA)” posts by Lauren Stinson, CMI:

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