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Georgia Sales Tax Regulation May Entitle Restaurants to a Refund


3/27/15

Synopsis
 
Last year, as a result of the Georgia Restaurant Association’s relentless lobbying efforts, the Georgia Department of Revenue (GADOR) finalized a sales and use tax regulation for restaurants and similar establishments that sell prepared food. The finalized regulation could result in significant tax savings and may entitle certain food establishments in the state of Georgia to a refund.
 
Issue
 
GADOR has clarified that sales tax is no longer required on the following items:

  • Disposable food packaging – single-use, disposable packaging used to contain food that is given to the customer such as boxes, wrappers, cups, dinner plates, and similar items
  • Items for sale – food ingredients and other items such as a toy, which will be resold by the establishment
  • Single-use items provided with meals sold – single-use items provided or made available to customers free of charge as a component part of a meal such as straws, swizzle sticks, stirrers, napkins, disposable silverware, toothpicks, and wet-naps
  • Food items provided with meals sold – condiments and other food items that are made available to the customer free of charge
     

The regulation also identified items and instances where sales and use tax must be paid:

  • Items used or consumed by the restaurant – tangible personal property not purchased for resale to the customer such as table covers, cloth napkins, silverware, and floral arrangements. These items may also include the cost of complimentary meals furnished to employees or customers, as well as single-use items such as paper towels, plastic utensils, plastic wrap, and paper placemats.
  • Gratuities – gratuities are taxable when negotiated in advance of a meal or event, unilaterally added to the bill by the seller, or mandatory under certain conditions
  • Other service charges – charges by the restaurant that are necessary to complete a taxable sale such as ID checking services and a fuel surcharge when delivering food
     

Tax Refund Opportunity
 
In Georgia, taxpayers have three years from the date of payment of the tax to amend sales tax filings in order to claim a refund of taxes previously paid.
 
Taxpayers that have paid tax on items that the regulation has clarified as exempt may request a refund of the sales tax improperly paid. Taxpayers should request and examine past invoices from their vendors and suppliers to determine whether a tax was assessed on exempt items.
 
Standard procedures for requesting a refund are provided within OCGA §48-2-35.1 and should be followed:

  • A restaurant should request a refund directly from its vendors and suppliers. The request should be made in writing accompanied by a completed Georgia Form ST-5 Exemption Certificate. The vendor can request a refund directly on behalf of the restaurant and then forward the taxes to the taxpayer or the vendor can waive their right to claim a refund of taxes by providing the taxpayer with a completed Form ST-12A Refund Waiver.
  • If the restaurant receives a completed Form ST-12A Refund Waiver, the restaurant may directly apply for a refund from the Georgia Department of Revenue.
  • If the vendor takes no action to provide a refund of taxes paid or does not provide a valid Form ST-12A within 90 days, the restaurant may directly file for a refund with Georgia by completing the Form ST-12 Refund Request along with Form ST-12B Purchaser’s Affidavit.
     

What Does CohnReznick Think?
Restaurant operators should proactively seek to maximize both their bottom line and cash flow as restaurants are faced with increasing food and labor costs, rising local and federal tax rates, and competition from other concepts. The potential sales tax refund opportunity coupled with the exempt treatment of certain current and future purchases can greatly assist Georgia restaurant operators in achieving both objectives.

Contact
 
For more information, please contact Stephanie O’Rourk, a CohnReznick partner who leads the Firm’s Hospitality Industry Practice in Georgia, at stephanie.orourk@cohnreznick.com or 404-250-4079, or Gary Levy, a CohnReznick partner and the Firm’s Hospitality Industry Practice Leader, at gary.levy@cohnreznick.com or 646-254-7403.
 
To learn more about CohnReznick’s Hospitality Industry Practice, please visit our webpage.


Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

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