Georgia revenue quarterly, Vol. 20, no. 2 (1998)

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GEORGIA

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REVENUE QUARTERLY

Zell Miller. Governor

T. Jerry Jackson, Commissioner

ELEC. FILING: GEORGIA NO.3

ATLANTA-A thirty percent increase in electronically filed income tax returns compared to one year ago, has enabled Georgia to finish NO.3 nationwide in the 1998 Joint Fed/State Electronic Filing Program.
"The Department ofRevenue is gratified by the public's continued acceptance of electronic filing." said DOR Commissioner T. Jerry Jackson. "This is the third year that electronic filing has been available in Georgia. and for the third consecutive year we

have finished among the top five states nationwide."
One of thirty-four participating states in the Joint Fed/State Electronic Filing Program in conjunction with the Internal Revenue Service_ to qualify to file their 1997 Georgia income tax return electronically, taxpayers were required to: 1) Be a full-year Georgia resident: 2) File a refund-only Georgia return: 3) File both their Federal and Georgia returns simultaneously (i.e.. with one electronic transmis-

sion); and 4) File their returns usi~1g an approved Electronic Returns Originator (ERO).
As ofJuly I. following are the top five participating states. by number of electronic returns filed. according to IRS Joint Fed/ State Program statistics: I. New York 5()3.M9: 2. North Carolina 539.106: 3. Georgia 486,-U4; 4. Michig;m425,379; 5. South Carolina 415, 102.

STATE SALES TAX ON GROCERIES

WILL BE ELIMINATED OCTOBER 1

ATLANTA-Effective October L 1998. with the removal of the final one cenl. the four percent State sales tax will be abolished on the retail sale of all eligible food and bever-

age products are the Homestead Local Option Sales Tax (HOST) imposed in DeKalb County and the Local Option Sales Ta.\: (LOST) in Taliaferro County. The food and beverage

sumption products (fountain drinks), vitamins and minerals. TIle food exemption does not include sales made by vending machines or seeds and plants used to grow food.

age products purchased for off-premises exemption applied to the Homestead Local

consumption.

================== "Because the rate drop on October 1 will

represent the last phase in a three-year

The removal ofthe final one cent represents

implementation to abolish the State sales

the culmination ofa three-part phase-in that

tax on food. the Department of Revenue

began October I. 1996, when the first two

wants to be certain that all dealers and re-

cents was lopped 01T. On October I. 1997.

tailers are aware of this final one cent reduc-

another one cent -the third- was

tion." said DOR CommissionerT. Jerry Jack-

dropped.

=~~A===~i"~=~~='f"';;;;s son. "We invite anyone who has questions

The elimination of Stale sales tax on food was a key legislative initiative of Governor Zell Miller that resulted in the passage of House Bill 265 by the 1996 session of the General Assembly.
The applicable rate of state and local taxes on eligible food and beverage in counties with varying sales tax rates will be as follows on October I. 1998( please see chart):
Currently, the only local option taxes which are not imosed on elisible food and bever-

Option Sales Tax eOcctive July L 1998, while Taliaferro County's Local Option Sales Tax exemption on food and beverage will take effect on October I. 1998.
The sale or use of food for "off-premises" human consumption. as defined by the federal Food Stamp Act. includes food that is a staple product for "home consumption" (meat. poultry. bread, milk, candy, canned soil drinks. etc.). It does not include alcoholic beverages. tobacco products. items sold hot or intended to be heated at a store. immediate con-

about this important change in sales tax law to call the Sales and Use Tax Division at (404) 656-4060. or their nearest DOR Regional Office."
(Sec State on page 2)

CONTENTS

ManagcJ AuJits .....

2

Cummissiuncr's Lcttcr ..

2

Ycar 2000 UpJalc ..

.. 3

ELOST ExplaineJ

4

Sales Tax 'Q & A'

G

Alcuhol Complaint Line

7

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Number 2

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A GeorgCa Dep;lrtment of Revenue

tax development summary

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COMMISSIONER'S LETTER
During the past sixteen months. the Department of Revenue has made a concerted effort to improve our level of service.
For taxpayers who are far removed from our headquarters building in downtown Atlanta. perhaps the most visible, and far-reaching example. of our efforts to serve taxpayers is represented by the eleven DOR Regional Offices located throughout Georgia. A key part of our Field Selvices Division. the Department has regional offices located in Albany. Athens, Augusta. Columbus. Douglas, Lithia Springs. Macon, Morrow. Rome, Savannah. and Tucker. Not only can these field offices answer any question over the phone (thus sparing the taxpayer a long-distance call to Atlanta). they can also accommodate taxpayer "walk-in" traffic. During Fiscal Year 199X (which ended on June 30), aecording to Fred D. White. Director of the Field Services Division. the Regional Offices handled over 429.500 telephone calls from taxpayers, and assisted more than 92.200 taxpayers in person. Those are impressive statistics, indeed.
Additionally. the Regional Ollices conduct taxpayer education seminars and workshops to assist taxpayers in developing a better understanding of tax law. They also examine taxpayer registrations. monitor compliance with filing deadlines and. utilil.i:1g a total of211 agents. collect outstanding (delinqueut) taxpayer accounts.
Perhaps the Department's most popular customer servicc device has been the implcmentation of our DOR Worldwide Website. As of its "second birthday" on July I. the Website had registered in exccss of2l5.000 "hits" from interested visitors. This can be allribuled to its always-expanding and timely menu of information. Whether your inquiry coucerns Income Tax. Sales Tax. Property Tax. Motor Vehicle. or press releases announcing our monthly collections (to name juS! a few examples). our Website is always active. always evolving.
If you have not yet visited our Website. I invite you to take a "test drive" twenty-four hours a day at hllp://www2.state.ga.us/Departments/DORJ. We stand ready to P~lt our best "customer sen'ice foot" forward.

MANAGED
AUDITS A
SUCCESS
By DAVID COPHER
The Central Audit Division instituted a m,ll}aged audit program in June 1997, and after the completion of its first year has been pleased with the results.
Patterned after the State of Ohio's successfulmanaged audit program. the Division has targeted small to medium-sized companies who were audited previously, resulting in minimal liabilities and issues (deemed to be questionable items of law) requiring resolution.
The managed audit is a hybrid of a self-audit and the traditional audit conducted by the tax specialist. It involves the same basic procedures as the traditional audit. with the taxpayer agreeing to participate in examination of records. The Division provides written audit instructions and ongoing consultation. with the taxpayer performing the detailed audit work subject to review by the tax specialist.
Once completed. the Division verifies the results before accepting it. with a resolution agreement signed by both the taxpayer and the Division upon completion and acceptance. The resolution and payment of any liability closes the audit period and accompanying issues - in the absence of fraud, malfeasance. misrepresentation offact. concealment. or erroneous mathematical calculations.

STATE LEVY ON FOOD ABOLISHED

(Continued frolllpage I)

The four percent state sales tax. and all applicable local county taxes. will continue to be collected on the sale of food sold lor "on-premises" or immediate consluuption -for example. food served in a restaurant. coffee shop. cafeteria. taverns. lood carts. luncheonettes or vending machines. It will also apply to the sale of hot loods. alcollOlic beYerages and tobacco products. as

well as on other items conllnonly available in grocery stores such as napkins. laundry detergents. vitamins and pet foods.
Purchases of eligible food and beverage for home consumption that are made with food stamps or WIC Coupons will continue to be exempt from all state and local county sales and use taxes.

The managed audit program has proven advantageous (0 both the taxpayer and the Division. The advantages for the taxpayer include: taxpayer education: enhanced future compliance: guidance from the Division; establishment of an ongoing, nonadversarial relationship with the Division; experience with the audit process; control of the audit in that it is conducted at the leisure of the taxpayer within an agreed upon time frame (normally l)O days or less); and time el1iciencies as the taxpayer does not have to train the tax specialist about internal

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(See Managed on page 7)
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Y2K PROJECT CONTINUES 'ON TRACK'

With the calendar advancing steadily toward January 1,2000, the Depm1ment ofRevenue's "Year 2000 Project Team" continues to make steady progress to ensure that all DOR computer applications will be Year 2000 compliant.
During the past twelve months, the Department has added over lOO consultmlts to augment its cxisting Information Systems Division (ISO) and Motor Vehicle Division staff in order to accommodate the additional workload. As well. it has contracted with a Year 2000 remediation factory to assist in implementing programming changes to sevcral of the Department's integrated tax applications.
The "mission critical" nature of the Department's tax processing systcms, and its infrastructure. is underscored fm1her by the fact that the DOR collects in excess of $13 billion annually to fund the operations of state government. Thus. it is easy to understand why the scopc ofthc Year 2000 effort is clcarly a top DOR priority - and why its importancc cannot bc understated.
Meeting the Mandate
"In conjunction with Governor Millcr's mandatc to all slate agcncies, the Dcpartment of Rcvenuc not only has a capablc Y2K Plan in place. we havc thc necessary funding from the General Assembly for it to succeed." said DOR Commissioner T. Jerry Jackson. "We arc also in full compliance with the Governor's directive that all agencies develop and have ready a workable 'backup plan' in case one is needed."
The cm\: ofLhe Year 2000 "problem" is based upon the reality that current compuler programming language cannot currently distinguish a "00" (denoting 10(0) from a "O()" denoting 2()()O. Exacerbating this dilemma is that the new millennium (read: 20()()) is also the very first "leap year" in the computer age that is divisible by .WO. Thus, computer programs/systems that do not have a builtin "update" for this leap year calculation will neither recognize that Febl1lary 20. 2()()O. is a valid date, nor calculate properly the days of the \\eek for dates alier Febl1lary 2X. 2000.

Solving these problems, then, will enable the Department's systems to remain fully operational on Jmmary I, 2000 - if not sooner.
Not to be overlooked is basic equipment utilized in the Department on a daily basis including desktop and laptop computers, fax machines and remitt,mce processors that get checks to the bmlk. All of them must be identified and replaced/reprognullmed as part of the Y2K effort.
A Full Plate
As this issue went to press, among its plethora of all-consuming tasks the Y2K Project Team was preparing to install the remediated Integrated Tax System Security Umbrella, followed in late summer by the Centralized Taxpayer Registration system.
This was preceded by installation of phase I of the Individua] Income Tax remediation. phase I of the Alcohol and Tobacco Tax remediation, and a (reCluired) preliminary remediation phase of the integrated tax systems.
"Our goal is for the Department's systems to be operational entering the Year 2000 with minimal, ifany, impact upon the general public" said Nancy Styron, a Y2K project nUlIlager. "There remains a lot ofreprogralllming and testing of systems to be accomplished so that the goal of Y2K compliance can be achieved."
An especially important area concerns the Motor Vehicle Division's processing ofvchicle tags and titles. The Motor Vehicle Division is modi(ying the integrated registration and title system as part of its Y2K effort. and thc new systcm will allow Georgia's IS0 counties to update a centralized data base online for faster and more accurate registrant service. Currently, many Georgia counties process tag and title registrations using different processing systems. Some usc automated systems while others process rcgistrations and titles manually.
The new tag and title system, utilizing the latest user-friendly computer technology. positions the county window service per-

sonnel to provide enhanced customer service to vehicle owners since all counties will be Clue!)'ing and updating the same data base. This is slated to be installed and fully functional by Labor Day 1909. Highlights of the system include a comprehensive correspondence module, an end-of-day tag and title fcc accounting and reconciliation modulc, a thorough automatcd treatment of the ad valorem tax process that is tied to the registration process by statute, and an automated inventory of plates and decals. The process is expected to speed the issuance ofa title from sevenl1 weeks clUTently, to several days when the system is implemented.
Other computer systems currently in the programming stage of remediation includc phase 2 of Individual Incomc Tax, Corporate Tax, Mail Cash. Centralized Taxpayer Accounting and Aleohol and Tobacco Tax.
Due to tax law changes as a result of the 100X session of the General Assembly, the Withholding Tax system is in the process of being rewrillen. It will be implemented in Janua!)' 1000 and will bc certified as Y2K compliant.
Among the non-]SD supported Y2K projects in the Department arc filePro applications within the Central Audit Division and Property Tax Division. Both divisions arc funding all hardwarc purchases from tllCir respcctive budgets and conducting code remediation and testing utilizing internal staff. Centra] Audit's rcmediation is scheduled to be completed in August 1998, and Property Tax is slatcd to have its applications certified by 1998 year-end.
Takcn togcther. thc Department ofRevenuc. in addition to collection and processing of taxes and associated documents, has a full agenda facing it -on many fronts- over the next IXmonths.

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EXPLAINING ELOST DISTRIBUTIONS

By JON GALBRAITH

differ within thc samc county:

On July 1, 1997, fifty-seven counties began imposing the Educational Local Option Sales Tax (ELOST), at a rate of 1 percent. Since then, additional counties have approved and implemented ELOST which has increased the total to 109 of 159 counties in Georgia.
Based upon the first ten (10) months of distributions from sales and usc tax reports filed by dealers and retailers, the Department of Revenue has distributed a total of $530,696,145.33 to Georgia school boards in ELOST money.
When Educational Local Option Sales Tax is collected, reported. and remitted each month by dealers to the DepartlllenL their sales tax returns arc verified first for accuracy before the appropriate ELOST alllount is then distributed to cach Local County and Independent School Board within the county imposing thc tax. ELOST's creation has enabled school boards to begin to accomplish specific school construction projccts through collection of this I percent sales tax. ELOST is mandatcd -by voter rcferendum- for either a spccificd time period not to exceed fivc (5) years, or to accumulate a maximum dollar amount -the projectcd cost- for the construction project(s) as outlined in thc rcfercndum. By law. once the maximum timc has cxpired. or the projected cost of the project has been collcctcd. whichcvcr occurs first. ELOST ceases immcdiately at the end of the calendar quarter.
Over the past several months, thc Department's Sales and Usc Tax Division has received many inquiries from counties, cities. school boards. and the media regarding why monthly ELOST distributions arc not always identical to any other I percent local county sales tax. There arc several reasons why. Historically. local option tax distributions have always differed by as much as 3 to 6 percent. Among the reasons (or this variance arc timing ofcollections. audits. delinqucnt collections. and use tax remittances.
Following is a general explanation about why monthly distribution of two local county sales taxes -one of which is ELOST: both ofthem imposed at a rate of I percent-might

Estahlishcd (Maturc) T;L~ YS. Ncw (Immaturc) Tax: La~ Timc
Whencver a ncw tax typc is imposed in a county. a number of dcalcrs will fail to calibratc thc applicable ratc changc into their checkout register. This rcsults in thc Dcpartmcnt -after subsequently analyzing sales tax rcturns received- billing thc dcaler for any undcr-paymenUunder-rcporting of tax. Until these dealersJ "learning curve" about the new tax results in correct reporting oj'sales tax collected, ongoing distributions hased upon these under-reported (incorrect) all/ounts 'Fill he lIIade to hoth ('oun(v and lndejielulent School noan/l. What happens to rectilY this situation is thaI. over timc, subsequent distributions will enable a school board's receipts to "catch up" to their proper level as businesses both correctly report sales tax each month, and remit (due to being billed by thc Departmcnt) any "back tax" that is owcd. It is duc to thesc two factors that school boards should begin to receivc higher than expected disbursements that serve to "catch them up" to the totals that they had been anticipating.
Thus, any "lag" experienced during the first several months of a new tax type becomes corrected as the new tax "ages" and becomes firmly established. i.e., "matures." along with full compliance by dealers.
Delinqucnt Paymcnts, Audits, Refunds
The collection oftax referencing a delinquent period, or an audit period prior to the elTective date ofa new tax. also playa major role in understanding the differences in local option sales tax distributions. Here arc two cogent examples: I) New Businesses. Generally. new businesses arc not audited during their first three years ofoperation. Therefore. any under-reporting of tax will be llllcovered solely by examination of sales tax reports filed with the Department. In contrast. 2) Established Businesses arc subject to audit every three years. This provides the Department with a second mechanism to scrutini/.e a company's records and subsequently correct any reporting deficien-

cies that may have alrcady, or arc at prcsent still, occurring.
Audits serve another valuable function: They enable thc Department to be "proactive" by providing a higher levcl of both taxpayer cducation and customcr service. This proccss thus bcnefits all conccrned - busincsses filing sales tax, the affccted county school boards duc to receipt of more accurate monthly distributions, and thc Department which can conscquently establish a beller working relationship with the business being audited. In a positive vein, audits also promote the concept of "sclfcompliance" by businesses and individuals: filing clean, error-free ST-3 reports may indeed rcduce the chance of a return being "flagged." and an audit being conducted by the Department.
Refunds or credits issued to dealers have the same effect on local county distributions by subtracting thc local county tax type that applies during the refund period. Claims for refund arc submitted for various reasons such as taxpayer filing errors, amended returns duc to returned merchandise. purchaser's failure to provide an exemption celtilicate at the timc of purchase. or other reasons (the original tax was erroneously paid to the supplier. for example). All circumstances pertaining to a refund claim are thoroughly reviewcd beforc a refund or credit is issucd.
The "good news" that should be gleancd from the preceding is that the Department has compliance mechanisms in place as a "check and balance" to insurc correct reporting. Additionally, it also makes eycry effort each month to i nlorm dealcrs of tax rate changes. This is accomplished by including a II/()nth~v rate chart in the sales and lise tax report jimll (the "'\'''1'-3 ") that is II/ai led to eve,y registered sales tax account. This rate chart is updated timely and thus reflects applicable county rate changcs at least 30 d(~vs he/lire the e.!fective date 4a nell' tax (vpe. Another venuc that contains updated. round-the-clock information is the Sales and Use Tax Division's presence on the Department of Revenue's Website. ft can bc accesscd by contacting this addrcss: http://www2.state.ga.us/departmcnts/dor/.

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Thc Conccpt of "Usc"
Salcs tax is gcncrally chargcd at thc rate of tax that is applicablc at the point ofdelivC!y. If a sale occurs in a county having a lowcr rate than thc county of usc (thc final dcstination whcrc thc purchascd itcm is takcn), thcn sales tax -to rcctify any diffcrcncc in thc tax ratc- will bc due in thc highcr county. Crcdit is givcn to thc taxpaycr for tax already paid in thc county with the lowcr rate.
Crucial to undcrstanding thc distribution of sales tax in thc prcccding examplc is that any diffcrcncc in salcs tax paid by thc consumcr to his county of rcsidcnce ("home county") -which has a highcr ratc than thc county whcrc thc itcm was purchascd- is distributcd back to his homc county by thc Dcpartmcnt. Equally important. any diffcrcncc in salcs tax distributcd bascd upon an out-of-counly purcllasc is allocatcd to thc appropriatc local option tax typc in thc taxpaycr's homc county. Hcrc is an cxamplc ofllow this is donc: County "A" (tllc 1I0mc county) has a 7 pcrccnt tax ratc that includcs thrcc local option tax typcs - LOST. ELOST and MARTA. County "B" (whcrc thc itcm \\'as purchascd) has a () pcrccnl tax ratc that includcs LOST and ELOST. In this cxamplc, thc taxpaycr owcs his homc county (County A) a nct diffcrcncc of I perccnt in salcs tax for thc purchasc. Bccausc County B rcccivcd its full 6 pcrccnt salcs tax atthc timc of sale (4 pcrccnt statc sales tax. I pcrccnl LOST, I pcrccnt ELOST). the I pcrccnt diffcrcncc paid to County A is allocaled 10 ils M/lR'l:/j lax. Tllc rcason is bccausc this is thc local option lax typc that was not paid! crcditcd at thc timc thc salc was consummatcd; thc consumcr paid both LOST and ELOSTat thc timc of sale. thus thc two corrcsponding local county tax typcs "offsct" cach othcr. Thcrcforc, allocations to thc appropriatc local county tax typc(s) alicr any offscts will a/ll'ilYs calise a dif/i'n'nce inlhe resulling lolal dislrihlliion 10 a curISI.IIIIC!' \ hOllle counly 01 the end oj'lhe lIIonlh whcthcr it afTccts LOST. HOST. ELOST. SPLOST. or MARTA tax. Simply put. monthly county ELOST distributions. comparcd to any othcr I pcrccnt local option tax typc. IFill never lIIatch dollar~/iJr-dollm:

Enforccmcnt of sales tax (bascd upon thc conccpt of "usc" of an itcm) is gcncrally not applicd to routinc purchascs by individuals, exceptjiJr purchases (?/"hig ticket" itellls such as' autolllohiles, hoots, and airplanes. Busincsscs are rcquircd to accruc, rcport, and rcmit any undcrpaymcnt of tax on thcsc typcs of purchascs that thc busincss makcs.
Cash vs. Accmal Accounting
Dcalcrs arc allowcd to rcport salcs and usc utilizing cithcr cash-basis or accrual-basis accounting. Cash-basis accounting providcs for thc rcporting of transactions al the timc paymcnt is rcccivcd, not at thc timc of dclivcry. Whcn a county's tax rate changcs bctwccn thc timc of delivcry and thc timc ofpaymcnt. thc tax ratc at thc timc of delivcry will apply. This frcqucntly rcsuits in a dcalcr rcporting somc ofthcir sales transactions undcr thc "ncw" ratc whilc rcporting othcr salcs transactions undcr thc "old" ratc; at thc cnd of that month diffcrcnccs in subscqucnt tax distributions to countics wilL of coursc. occur.
Thc accrual mcthod of rcporting is bascd upon whcn a salc is madc - whicll is not always at tllc timc thc dcaler rcccivcs paymcnt. This rcporting mcthod docs not crcatc difTcrcnccs in local county tax distributions bccausc thc transaction is subjcct to all local county taxcs at thc timc ofsalc.
*****
Thc Salcs and Usc Tax Division hopcs that thc prcccding cxplanation will help to clari(v any misconccptions conccrning tllc collcction and distribution of thc Educational Local Option Sales Tax. Anyonc having qucstions is invitcd to call cithcr thcir ncarcst Rcgional OlTicc or DOR Hcadquartcrs in Atlanta at (404) 6S6-4060.

TAXPAYER AWARENESS SEMINARS
Following below is a list of the rcmaining 11.)1.)8 Taxpaycr Awarcncss Scminars conductcd annually by the Dcpartmcnt of Revcnue's Sales and Usc Tax Division. Conductcd frcc of charge, advance confirmation of allcndance is rcquired. Over thc ycars. thc seminars havc provcn both an clTcctivc, and popular, mcthod of cducating thc public about gcncral salcs and usc tax law, local taxcs, audit prcparation, and othcr topical arcas of intcrcst.
Taxpaycrs rcquiring furthcr information, or who wish to rcgistcr to allcnd a spccific scminar, arc invitcd to call thc DOR's Salcs and Usc Tax Division in Atlanta at (404) (JS(J-40(,(). Tllc rcmaining scllcdule:
Scptcmhcr 24: Columbus Statc Univcrsity, Auditorium. Columbus; 8:]0 a.m.-+:]O p.m.
Octohcr 22: Gaincsvillc Collcgc, AuditoriUIll Gaincsvillc: 8:]0 a.m.-4:30 p.m.
Novcmhcr 13: Russcll Rcscarch Ccntcr, Auditorium, I.)SO Collcgc Station Road, Athcns: I.) a.m.-S p.m.
Dcccmhcr 8-9: NOl1h Fullon Govcrnmcnt Scrvicc Ccnlcr. 774 I Roswcll Road, Sandy Springs: 8:30 a.m.-4JO p.m.

PagcS

SALES & USE TAX 'Q & A'

Since the debut of the new Sales and Use sian and/or title to the property. Normally,

Tax Report Form (the "ST-3") last summer, this occurs where the purchaser takes deliv-

the DOR's Sales and Use Tax Division has ery of the product.

conducted over 100 taxpayer seminars and

workshops to educate the public about its 4, Arc churchcs cxcmpt from Gcorgia

implementation. The Division has also pro- salcs and usc tax? No. Georgia does not

duced a popular thirty-minute video -avail- grant a sales or use tax exemption to churches

able free of charge- that contains three or other nonprofit organizations. Churches

problem-solving examples. Along with ask- are, however, exempt from sales and use t,L,es

ing questions at Sales T,L' seminars, t,L,pay- for purchases of bibles, testaments, and

ers have also called seeking help over the other similar books recognized as Holy Scrip-

phone to solve a variety of questions and ture.

problems concerning the ST-:1.

5, If my nonpmtit OI'ganization holds an cx-

Following below is a compilation of com- cmption cCItificatc in anothcr statc, will

monly asked questions by ST-:1 filers. The Gcorgia honor it and cxcmpt it from Gcor-

Sales and Use Tax Division hopes that the gia salcs tax? No. Georgia docs not recog-

answers to these questions will lead to easier nize an exemption certificate issued by an-

preparation of your ST-:1. While arithmeti- other state to a nonprofit organization.

cal mistakes do occur from time to time. the

Division's goal is for every filer's prepara- 6, Arc salcs of maintcnancc agrccmcnts

tion time when filling out an ST-:1to decrease subjcct to Gcorgia salcs and usc tax? No.

with each succeeding month. That should Charges for maintenance agreements or ex-

translate into cleaner. error-free returns. and tended warranties. when stated separately

less frustration and questions from you - on an invoice, arc not subject to Georgia sales

our customers. If the Division can be of fur- and use tax. The service provider is consid-

ther assistance. please do not hesitate to call ered the end consumer of any tangible per-

the Atlanta headquarters at (-lO-l) ()56--l0W sonal property used in maintenance or re-

from 8 a.m.-4:-l5 p.m., Monday through Fri- pair. If the agreement provides for a charge

day. or your nearest DOR Regional Ol1ice. to the customer for parts. this charge is sub-

ject to sales tax as would be any other retail

l. Is a salcs and usc tax rcp0l1 form always sale.

required to befiled whcn a husincss docs

not have (111)' salcs or usc to rcp0l1'! Yes- 7. h computcr softwarc suhjcct to Gcorgia

it is always required. in every case. The sales salcs and usc tax? Georgia sales and use tax

and use tax report form is required to be filed applies to pre-wrillen software. This can be

regardless of whether or not any sales or either "canned" software (in a standardized

use tax activity took place in the preceding format that can be used by the general pub-

tax period (monthly or quarterly). All tax- lic - basic "word processing software." for

payers are required to file reports mon[hly. example) or "modified" software (standard-

unless permission is received from the ized in a precise format that can be used to

Department's Sales and Usc Tax Division to perform a specific task or function). An ex-

file on a different reporting basis.

ample of modified software would be tax

preparation software: it is both prewritten

2, Arc frcight chargcs that arc part of a and modified so either a taxpayer, or tax prac-

rctail salc suhjcct to salcs tax'! Freight titioner. can use it to prepare tax returns.

charges are taxable unless the delivery is ar-

ranged by the seller as agent for the pur- Sales and usc tax docs not apply to soflware

chaser. Also, the charge must be separately written for. or tailored to. an individual

stated, be prepaid by the seller. and the terms customer's specific needs or requirements.

of the delivery be FOB shipping point.

The appropriate term for this kind of soll-

ware would be "customized" soli ware.

3, What tax ratc should a dcalcr chargc on

a taxablc sale'! Dealers arc responsible for 8. Is food cxcmpt from Gcorgia sales and

charging the rate of tax applicable to the usc tax? The sale or usc of food for "oIT-

county where the purchaser takes posses-

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premises" human consumption, as defined by the federal Food Stamp Act, has become gradually exempt from the 4 percent Georgia state sales tax. (On October 1, 1998, it will become fully exempt.) The federal Food Stamp Act defines food as a staple food product for "home consumption" (meat, poultry, bread. milk, candy, canned soft drinks, etc.). It does not include alcoholie beverages, tobacco products, items sold hot or intended to be heated at a store, immediate consumption of products (fountain drinks), vitamins, and minerals. The food exemption does not include sales made through vending machines, or plants that grow food (tomato plants, for example). Retail dealers are required to maintain adequate records of all sales of eligible food and beverage.
9, What is thc cu rrent tax nlte chat'ged on thc salc of eligiblc food for "ot'f-pl'cmiscs" consumption? The applicable rate of tax on eligible food is -l percent in a 7 percent county (except for DeKalb County), 3 percent in a 6 percent county and DeKalb County. 2 percent in a 5 percent county, and I percent in a -l percent county. On October I. 1')')8. the rate oftax will be further reduced by I percent. thus eliminating all State sales tax from sales of eligible food and beverage.
Food sold for "on-premises" or ill/II/ediate consumption. hot foods. alcoholic beverages and sales through vending machines are subject to the general rate of tax in a county.
10. Will thc eligiblc food and bcveragc cxcmptioIl apply to local county taxes? The food exemption will apply only to the follo\\ing local county taxes on the specific dates for any Local Option Tax imposed after October I. 19':)(1. Effective July I, 1997, this exemption applied to the Homestead Local Option Ta, (HOST) imposed in DeKalb County. Effective October I. 1998, the exemption will apply to the Local Option Tax in Taliaferro County.
11. Arc lahor charges subjcct to Gcorgia salcs and usc tax? Charges for installation and repair labor. when staled separately on an invoice. are not subject to Georgia sales and use ta.'\. Repair labor means labor needed to restore an item to working condition. In-

stallation labor means labor needed to install tangible personal property.
Fabrication lab()/~ howcver, is subjcct to Gcorgia sales and usc tax regardlcss of how thc charge is stated on the invoice. Fabrication labor is labor rcquired to produce an al1icle from stock or custom materials into a ncw article with a ncw form, quality or propcrty. This includcs the cutting. carving, or shaping of a stock or custom article when a ncw article is crcated. Somc cxamples offabrication labor arc thc creation of curtains or window trcatments from cloth. the crcation ofa dress or suit from cloth. or the manufacture of cabincts or counter tops from wood or othcr products.
12. Is it truc that thc Dcp.u"tmcnt is otTcring a frcc salcs and usc tax tnlining "idco? How can somconc ohtain a cop~'? Yes. it is. Simply call your nearest DOR Rcgional Office or, in the Metro Atlanta area. (404) 6577073 to ordcr thc video. It contains three problem-solving examples along with a sales and usc tax instruction workbook. and lasts approximately thirty minutes.
13. If I nccd tll mal{c changcs or corrcctions to my salcs and usc tax rcgistration cCl1ificatc. is thcrc a numbcr that I can call to accomplish this OWl' thc telcphollc? Yes. there is. Plcase contact the DOR 's Centralized Taxpayer Registration Unil at (404) (l51X(l51. They will be pleased to make any and all needcd changes to your sales tax registration information.

ALCOHOL COMPLAINT LINE

ATLANTA-In a move designed to bolstcr thc cffcctiveness of its Undcrage Alcohol Investigation Task Force, the Dcpartmcnt of Revcnuc has implementcd a toll-free complaint line. DOR CommissionerT. Jerry Jackson has announced.
Availablc twenty-four hours a day, the tollfree complaint line-I-877-CHECK-ID- is dcsigncd to facilitate the rcporting of alcohol sales to undcragc persons and related violations.
"Under the auspices of our Alcohol and Tobacco Division, we regularly conduct undcrage investigations to reduce undcrage drinking and related DUI violations by underagc persons," Commissioncr Jackson said. "This toll-frcc complaint linc compriscs another cffective tool in our arsenal to convcy an important messagc: Underagc aleo-

hoi violations. of any kind. will be strictly enforced by this Dcpartmcnt."
In conjuction with its undcrage compliance and monitoring activities. the Alcohol and Tobacco Division will conduct several largescalc undcrage alcohol operations throughout Georgia over thc ncxt several months. The invcstigations will utilize underage undercover opcrativcs and arc bcing conducted in response to complaints received by the Dcpartmcnt and local law enforcemcnt agcncies. and requests for assistance from local agencics.
Along with the toll-free complaint line, taxpaycrs can also report underage alcohol violations by accessing the Division's webpage at www2.state.ga.us/departments/dor/alco!.lQLor contacting the Division bye-mail at atdiv((11rev.state.ga.us.

MANAGED AUDITS REAP $$

(Continucd fmm pagc 2)

accounting operations and procedurcs. In additiou. the Dcpartment agrees to waiver of penalty upon paymcnt of tax and intcrest.
The Department benefits from the managed audit because the process educates the taxpayer and increases future compliance. overall compliance is increased due to the cumulative audit hours saved and other cfficiencies. the process enhances the tax specialists' organizational and comlllunications skills. a working relationship is established with the taxpayer thus increasing the Dcpartment 's elTorts at customer servicc. and the audit is concluded quickly \vithout delays, appeals. or litigation.
Thc Central Audit Division has thus far been pleasantly surprised by the success of the program and thc interest exhibited. Although tailored to small to medium-si/.ed companies.

any interestcd taxpayer. although it rescrves the right to limit agreements to those taxpayers who have the pcrsonnel and resources to conduct thc managed audit thoroughly.
To dale. the Division has signed 22 agreemenls and cOlllpleted 12. The results of the complcted agrecments have bcen impressive: net collections of $459.5<)2: an average return per hour 01'$2,802: a total time savings 01'317 hours referencing the 8 audits having a previous audit histOJ)': and an averagc timc reduction of 72.6 percent. As a result of its demonstrated success. the Division plans to make the managed audit program a regular part of its already comprehensive audit function. with the goal for it to become the "norm" rather than the exception. Any taxpayer desiring additional information or who would like to discuss the managed audit pro-

several large companies have also expressed gram in greater detail. is invited to contact

interest in the managed audit program. The Ed Many, Director. Central Audit Division. Division is always pleased to discuss it with at 404..65 1-5417.

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Gcorgia Dcp:uimcnt of Rcycnllc AdministratiYC Division Information Ofticc - Room -to I 270 Washington Strcet Atlanta, GA 3033-t