Georgia’s Department of Revenue has launched a public consultation on the proposed regulations regarding the taxation of digital product sales.
The rules set forth the application of Georgia sales and use tax concerning the sale or use of specified digital products, other digital goods, digital codes, as well as internet access service. The proposed regulations will help implement Senate Bill 56, expanding Georgia’s sales tax to cover digital goods and products sold for permanent use, starting 1 January 2024.
The deadline for submitting public comments is 19 December 2024.
Imposition
Under SB 56, the tax will apply whether the product is downloaded, accessed online, or hosted elsewhere. Other digital goods, or digital codes sold to an end user in this state, provided that such end user receives or will receive the right of permanent use of such products, goods, or codes and the transaction is not conditioned upon continued payment by the end user.
In addition, if the seller allows the end user to download and retain the product, then the purchase has conferred the right of permanent use to the end user. This applies even if the end user’s right of permanent use is contingent upon continued payment by the end user.
For example: the purchase of a digital newspaper subscription permits an end user to both permanently download the newspaper and also access the newspaper online, the charge for the subscription is taxable.
If a transaction contains both non-fungible tokens (NFT’s) and taxable specified digital products, other digital goods, or digital codes the entire transaction is taxable. For example, an end user purchases digital graphic art that is minted with an NFT. In this case, the entire sales price of the digital graphic art and the NFT is taxable.
Exemptions and exclusions
Sales and use tax does not apply to:
- Internet access service; or
- The sale of prewritten computer software transferred electronically to the purchaser or delivered to the purchaser by means of load and leave;
- Software as a Service (SaaS);
- Subscriptions for which the end user does not receive the right of permanent use of the specified digital products, other digital goods, or digital codes or the end user’s right of use of the specified digital products.
Withdrawals from inventory
The proposed regulations clarify that a dealer who purchases specified digital products, other digital goods, or digital codes under terms of resale without payment of sales and use tax is liable for use tax on the cost price of such property if it is withdrawn from inventory and used for a taxable purpose.
