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The Georgia Department of Revenue has reminded taxpayers that as part of an amended regulation, sales and use tax direct payment permit applications are now available through the Georgia Tax Center (GTC) website, and that direct payment permits not issued through the GTC expire on December 31, 2016. To obtain a direct payment permit that is effective on or after January 1, 2017, a taxpayer must:


  • complete a direct payment permit application online through the GTC website 
  • have purchased more than $2 million in tangible personal property in the 12 months before application or have purchased an annual average amount exceeding $2 million in tangible personal property during the 36 months before application 
  • agree to waive interest on refunds of sales and use tax remitted for purchases made on or after January 1, 2017, without the payment of tax to a vendor 
  • make specified attestations; and 
  • be classified on their previous year’s federal income tax return under one of a number of specified North American Industry Classification System (NAICS) codeswhich include Wired and Wireless Telecommunication and Satellite Providers; Air, Rail and Freight Transportation Providers; Mining, Quarrying and Oil and Gas Extraction; Utilities and Manufacturing.


All permits, letters, and certificates not issued through the GTC online application process expire December 31, 2016, and cannot be used to make tax exempt purchases after that date. Direct payment permits issued through the GTC online application process are effective the later of January 1, 2017, or the issuance date.


Effective January 1, 2017, a direct payment permit holder must furnish to every vendor from which it makes tax-exempt purchases a copy of the holder’s direct payment permit, unless the holder has previously furnished the permit to that vendor and that permit is valid at the time of re-application. Effective January 1, 2017, unless a vendor has received notice of the revocation or voluntary surrendering of a direct payment permit, the vendor is relieved of the duty of collecting sales tax on all permissible transactions for which the purchaser has provided a direct payment permit, even if the permit expired before January 1, 2017. Effective January 1, 2017, the Department can revoke a direct payment permit for violation of the regulation. The amended regulation no longer states that direct payment permit holders are not required to present an additional exemption certificate. (Notice, Georgia Department of Revenue, December 2, 2016; Reg. 560-12-1-.16, Georgia Department of Revenue, effective May 26, 2016, and applicable as noted)


The Georgia Court of Appeals has upheld the denial of a sales tax refund sought by a contractor on items it purchased for use in the construction of facilities in Afghanistan for the U.S. government. The contractor argued that it was entitled to a resale exemption as a reseller to the federal government. The contractor contended that it was not a retail consumer who would be liable for sales tax on the items. The Court of Appeals noted that the "contractor-as-consumer" rule of J.W. Meadors & Co. v. State holds that a contractor is considered the consumer of the items it purchases for use in a construction contract. Georgia tax code applies the "contractor-as-consumer" rule to contractors who furnish tangible personal property and perform services under the contract "within this state." The Afghanistan contracts were performed outside Georgia, but the contractor had purchased and stored property in-state for use in the contract prior to shipping to Afghanistan. As a result, the Court of Appeals held that the contractor was liable for sales tax as a consumer and was not entitled to a sales tax refund. (Inglett & Stubbs International, Ltd. v. Riley, Georgia Court of Appeals, No. A16A1274, October 25, 2016)


On August 25, 2016, House Judiciary Committee Chairman Robert Goodlatte released a discussion draft of the Online Sales Simplification Act of 2016. The legislation would implement a “hybrid origin” approach for remote sales. Under the legislation, states could impose sales tax on remote sales if the origin state participates in a clearinghouse.In this case, the tax is based on the origin state’s baseand taxability rules. The rate would be the origin state rate, unless the destination state participates. In that case, the rate used would be a single state-wide rate determined by each participating destination state. A remote seller would only remit sales tax to its origin state for all remote sales. Only the origin state would be able to audit a seller for remote sales. Non-participating states would not be able to receive distributions from the clearinghouse. Sellers would be required to provide reporting for remotes sales into participating states to the Clearinghouse so it can distribute the tax to the destination state. We will continue to monitor activity and update when the official bill is introduced.  (Discussion draft of Online Sales Simplification Act of 2016)


On July 14, 2016, Rep. Jim Sensenbrenner (R-WI) introduced the No Regulation Without Representation Act of 2016.  Taking the opposite approach of the Marketplace Fairness Act and Remote Transactions Parity Act, this proposed bill would limit the ability of states to require remote sellers to collect use tax. If enacted, the Act would codify the physical presence requirement established by the US Supreme Court in Quill Corp v. North Dakota.  The bill would define physical presence and create a de minimis threshold. If enacted, the bill would preempt click-through nexus, affiliate nexus, reporting requirements and marketplace nexus legislation. The bill would be effective as of January 1, 2017. The bill defines “seller” and provides that states and localities may not:


  • Obligate a person to collect a sales, use or similar tax; 
  • Obligate a person to report sales; 
  • Assess a tax on a person; or 
  • Treat the person as doing business in a state or locality for purposes of such tax unless the person has a physical presence in the jurisdiction during the calendar quarter that the obligation or assessment is imposed.


Persons would be considered to have a physical presence only if during the calendar year the person: 


  • Owns or leases real or tangible personal property in the state; 
  • Has one or more employees, agents or independent contractors in the state specifically soliciting product or service orders from customers in the state or providing design, installation or repair services there; or 
  • Maintains an office in-state with three or more employees for any purpose.


Physical presence would not include: 


  • Click-through referral agreements with in-state persons who receive commissions for referring customers to the seller; 
  • Presence for less than 15 days in a taxable year; 
  • Product delivery provided by a common carrier; or 
  • Internet advertising services not exclusively directed towards, or exclusively soliciting in-state customers.


The bill defines seller to exclude marketplace providers; referrers; third-party delivery services in which the seller does not have an ownership interest; and credit card issuers, transaction or billing processors or financial intermediaries.Marketplace Providers are defined as any person other than the seller who facilitates a sale which includes listing or advertising the items or services for sale and either directly or indirectly collects gross receipts from the customer and transmits the amounts to the marketplace seller. (No Regulation Without Representation Act of 2016 (H.R. 5893))


UPDATE: This bill failed to pass during the 114th Congressional Session running from January 3, 2015 to January 3, 2017.  Therefore, this bill has died and would need to be reintroduced to be considered and voted on.


On February 11, 2016, the U.S. Senate approved a permanent extension of the Internet Tax Freedom Act (ITFA) that is included in H.R. 644, the Trade Facilitation and Trade Enforcement Act of 2015. The bill also establishes an end date of June 30, 2020 for the seven states that currently impose a tax on internet access: Hawaii, New Mexico, North Dakota, Ohio, South Dakota, Texas, and Wisconsin. President Obama is expected to sign the permanent extension of the ITFA into law. The House of Representatives had previously passed H.R. 235, the Permanent Internet Tax Freedom Act, on December 15, 2015.  For our previous news item on this topic, visit Internet Tax Freedom Act Extended Through October 1, 2016.


UPDATE: On February 24, 2016, President Barack Obama signed into law the permanent extension of the Internet Tax Freedom Act.


(Trade Facilitation and Trade Enforcement Act of 2015)



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