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Government Contractor in Georgia Liable for Tax on Items Used Overseas


Construction

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)

(11/16/2016)
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