If your company has collected sales tax from a customer but has not remitted this tax to the Georgia DOR, take immediate action. Failure to remit sales tax collected can ultimately result in criminal and civil penalties. Pay the tax, then find and correct the problem.
Significant monetary and legal consequences can result from this oversight, especially if this is a recurring issue. Multiple ways exist for the state to find out about the unremitted sales tax. For example, the state may audit one of your customers and see sales tax on your invoices, but find no record of your company being registered in Georgia.
Three Questions to Consider - Begin solving the problem by asking these three questions:
1. Is your company registered in Georgia and required to collect and remit tax for taxable sales into the state?
2. Are the customers that you collect tax from set up incorrectly in your company’s ERP billing system?
3. How long has this issue been going on and what amount of tax has been collected and not remitted?
Options to Resolve Compliance Errors - Based on your answers, several options exist for correcting these compliance errors.
Option 1: If your company does not have nexus (some type of physical presence) in Georgia and is not required to collect sales tax, the best solution may be to return the money to the customer. This is a good solution if the collection mistakes are isolated errors that are recent.
Option 2: If you have no nexus in the state and you erroneously collected sales tax but refunding customers is impractical, consider submitting a one-time remittance to the DOR.
Option 3: If your company is not registered, but you discover that nexus does exist, the best solution may be to consider a voluntary disclosure agreement, especially if your company has been collecting sales tax for more than two years. Even though tax has been collected, the state may agree to waive penalty if you come forth and voluntarily remit the tax. You will have to pay back all the taxes collected even if the taxes were collected beyond the statute of limitations.
Option 4: If your company is registered in Georgia but you inadvertently didn’t remit sales tax, then amend your returns and remit the tax. Also request that the penalty be waived because you are being proactive to correct the error.
Once you’ve determined the option that matches your scenario, take steps to correct the problem. Either give the tax back to your customers or remit it to the DOR. Don’t wait to get caught. The penalties will be severe.
Other recent “Georgia (GA)” posts by Lauren Stinson, CMI:
- Georgia's New Sales Tax Law Requires Registration or Reporting
- When Businesses Retain Contractor Services in Georgia: Tax Tips
- Yikes! I Collected Sales Tax But Didn't Remit to the Georgia DOR
- Sales Tax on Labor: In Georgia, Not All is Created Equal
- A Review of Georgia's Sales Tax Exemption Certificates