Frequently Asked Questions

DISCLAIMER: The preceding information is not intended as legal advice. It is simply an overview of the law and should not be relied upon to settle legal matters.

Retain a tax lawyer in the applicable state to examine whether your business qualifies for a voluntary disclosure agreement with the respective taxing agency.

Whether you are in Atlanta, the State of Georgia, or in another state, but frequently do business in Georgia, you need to retain the services of a qualified business and tax lawyer. The Litwin Law Firm, P.C. represents businesses faced with multistate tax issues. To schedule an appointment, call (678) 990-0600.

Yes. For sales to customers in “streamlined” states (check the respective state to confirm whether it is a member of the Streamlined Sales and Use Tax Agreement), you should get the exemption or resale certificate within 90 days of the sale. If you have an ongoing relationship with the customer and make many sales throughout the year, a “blanket” certificate is sufficient. Otherwise, in many states, the law assumes that all sales are taxable retail sales. As such, the seller has the burden to show that a sale is not a retail sale and not subject to sales tax. Taking a properly-completed resale/exemption certificate from the purchaser, however, in most instances and absent fraud or collusion with the purchaser, relieves the seller of this burden to prove that the sale is not a retail sale subject to sales tax. Trying to get the resale/exemption certificate after-the-fact, such as during an audit, can prove to be difficult, especially if the customer is no longer in business. You then must turn to other ways to prove that the sale is not a taxable retail sale.

You should take these investigations seriously and respond to nexus questionnaires, but do not answer the questions in haste. The other state’s inquiry could arise from evidence of telecommuting employees who live in the other state and for whom income taxes are withheld and paid to the other state. The other state may also have evidence that your company-owned trucks have entered the state. If your business receives a nexus questionnaire, consult a reputable business attorney to ensure that the questions are answered properly.

If your business is the end-user or not otherwise exempt, your business is probably required to pay the complimentary “use” tax. Be careful when a vendor tells you “no sales tax” is due on your purchase. The seller may choose not to collect your state’s sales tax and, indeed, may have no legal obligation (because of lack of nexus) to collect your state’s sales tax. But this does not mean that your state’s corresponding “use” tax is not due. As the end-user, your business may be required to accrue and remit use tax to your state. In Georgia, for instance, businesses that do not have a sales tax number must report and pay use tax using Georgia Form ST-3USE.

The answer depends upon the extent of your contacts in the other state. Generally, “physical presence” in the other state is necessary before the other state can force your business to collect and remit the other state’s sales and use tax. Therefore, if your Georgia business:

a) sends employees into the other state(s), to make deliveries on company-owned trucks or to handle customer accounts or solicit sales,

b) owns property (real or personal) in the other state(s),

c) employs persons who live in the other state(s) or have some other business presence in the other state (such as an office), or

d) retains independent contractors to solicit sales in the other state(s),

then your business may have nexus (connection with the other state) sufficient to require collection and remittance of the other state’s sales and use tax.

Some states, including Georgia, impose nexus based on ties that your business has with local vendors that direct a local customer to the your business’ Web site. This is commonly known as “click through” nexus found in state Amazon laws.

For income tax purposes, solicitation of sales (by employee visits to the other state or through independent contractors) is not sufficient for the other state(s) to require your business to pay income tax due to the federal protections under Public Law 86-272. However, P.L. 86-272 does not protect every situation. The federal prohibition against the imposition of income tax protects only income from sales of tangible personal property. The federal bar does not protect income from leasing tangible personal property or from selling services in the state. Additionally, the federal bar does not protect the seller if the seller’s activity in the other state exceeds solicitation of orders for approval or rejection outside the respective state and fulfillment from places outside the taxing state. The threshold for income tax nexus has eroded in recent years. Most notably, some state appellate decisions now hold that “economic nexus” (deriving business from customers in the state) is sufficient to create nexus for income tax purposes. Finally, the federal protections under P.L. 86-272 do not protect your business from other taxes not tied to net income, such as franchise taxes and business privilege taxes.

The Litwin Law Firm, P.C., based in Atlanta, Georgia, represents clients statewide including Fulton County, Dekalb County, Decatur County, Cobb County, Douglas County, Forsyth County, Gwinnett County, Rockdale County, Henry County, Clayton County, Carroll County, Fayette County, Paulding County, Bartow County, Richmond County, Muscogee County, Columbia County, Clarke County, Chatham County Dougherty County, Glynn County and Cherokee County including the cities of Sandy Springs, Alpharetta, Roswell, Carrollton, Decatur, Marietta, Smyrna, Duluth, Cumming, Woodstock, Athens, Brunswick, Gainesville, Douglasville, Newnan, Peachtree City, Lawrenceville, Stockbridge, McDonough, Rome, Augusta, Savannah, Macon, Columbus, Albany and Dalton.

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