On March 22, 2012, the Georgia General Assembly passed significant tax legislation that now awaits the signature of its supporter, Governor Deal. HB 386 includes comprehensive changes affecting most individuals and businesses in Georgia. A summary of the major provisions follows.
New taxation of motor vehicles
State and local sales tax and ad valorem property tax are eliminated for vehicles purchased on or after March 1, 2013. Instead, the law imposes a 7% combined state and local title fee on new, used and leased motor vehicles. Fees for transfers between immediate family members are at a lower 0.5% rate. The fee applies to dealer sales, casual sales, leases, and out-of-state purchases transferred to Georgia. Between the law's effective date and March 1, 2013, the purchaser may elect either the new title fee system or the existing sales and ad valorem tax system.
On a joint return, the exemptions for the primary taxpayer and spouse are increased from $2,700 each to $3,700 each, or $7,400 combined. The exemption for married filing separate status is increased by $1,000 to $3,700.
Retirement Income Exclusion
The retirement income exclusion is capped for filers age 65 and older at its current 2012 level of $65,000. Absent this cap, the retirement income exclusion would have been unlimited beginning in 2016.
Beginning January 1, 2013, the conservation easement credit for partnerships is capped at $500,000 per entity, currently $1 million. The bill modifies the definition of qualified property eligible for the credit and allows for multiple transferees.
Simplification of Manufacturing, Mining, Agricultural Sales Tax Exemptions
The bill provides a sales tax exemption on all business inputs, such as machinery, consumable supplies, equipment, and energy necessary and integral to producing tangible personal property, agricultural, horticultural, and livestock products.
Beginning January 1, 2013, the bill will phase in over four years a sales tax exemption on energy used in manufacturing and mining. Local governments may opt into the exemption for local sales tax on energy. The bill also defines a qualified agricultural producer and requires application for the exemption with the Commissioner of Agriculture. To quality, the owner or lessee of property must produce at least $2,500 in agricultural products during the year.
Sales Tax Holiday
The bill reinstates the sales tax holiday for qualifying computers, school supplies, clothing, and energy-efficient equipment and sets the dates as August 10 - 11, 2012.
Sales Tax Exemption for Competitive Projects
HB 386 establishes a sales tax exemption for construction material purchases between January 1, 2012 and June 30, 2014 for designated projects of a regional significance (Caterpillar).
The objective of this provision is to subject purchases made at retail stores and on the internet to similar sales tax rules. The bill adopts “click through” nexus for internet retailers and their affiliates. For example, under the bill, Amazon would have to collect sales tax from Georgia customers so long as Georgia businesses use Amazon's web-based platform. Should Amazon choose to terminate all of its contracts with Georgia-based businesses, as it did in North Carolina when similar legislation was passed there, then the bill will become futile.
Bradford C. Dickson, CPA
Bradford C. Dickson, CPA is a tax principal with Windham Brannon, P.C. in Atlanta, GA and a member of the GSCPA Tax Section Leadership.