Sales Tax Exemptions Go With Tax Credits
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Did you know that Georgia manufacturing companies utilizing the Investment Tax Credit may also get Georgia sales tax exemption $$ on the same project?
We were reminded of these overlooked $$ by Ned Lenhart, CPA, of Sales Tax Advisors of
Georgia (click here to contact him). Ned is an expert in this area, and here is an overview of what he had to say: -
There
are many sales tax exemptions that are available to manufacturers, and they are
frequently overlooked. At the 7% sales tax rate, a client that misses $1,000,000 a
year in exempt items will overpay $70,000 in
sales taxes. This can really add up! The key to maximizing the
sales tax exemptions for manufacturers is to first identify where
manufacturing starts and stops and then to look for all of the qualified
purchases that occur in the "manufacturing" process.
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In the past,
Georgia was very traditional about its exemptions for manufacturers and limited these to machinery, equipment, and major component replacement parts. Some exemptions
were also available for electrical components and process piping when used in
certain parts of the plant.
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But, in
2009, the Georgia legislature made many changes to these laws, and DOR finally
released the regulations last November (click here for regulations). Bottom line - the changes will help your clients, since the law increased the
number of items exempted and added such things as hand tools, quality control
equipment, safety equipment, forklifts, and pollution control equipment. In addition, companies need to make
sure they are maximizing exemptions for ingredients, component parts, and packaging
supplies.
Now for the hard part -- claiming sales tax exemptions can
be tricky. Many items can be used in exempt and non-exempt ways, and your client's accounting personnel may not understand those specific details as they process
invoices. This can lead to
overpayment of tax! Determining whether
your client should pursue a refund for any overpaid sales or use tax is also a
challenging issue. Claims should
be filed only after a company has a clear understanding of their total
exposure.
While most manufacturers are well-versed in
the generalities of these sales tax exemptions, most of them have not updated
their tax processes to truly maximize the opportunity to save sales tax dollars on purchases, or to recover taxes that have been overpaid to vendors or to
the state.
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Georgia Chamber Power Lunches
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We attended the Gwinnett County version of the Georgia Chamber of Commerce's Power Lunch series earlier this month. Like it or not, change is on the way! Suzanne Sitherwood (Atlanta Gas Light), 2010 Chairperson, discussed the chamber's
major initiatives for the coming year including: taxation, economic development, transportation, water, legal reform, education, and healthcare. Attend the luncheon near you! (click here for details)
Buzz from the Luncheon: the 2011 Session will be a very interesting! In addition to a new Governor, a large % of the legislators will also be new. So now is
the time to get active with your local chamber as well as the Georgia Chamber
to voice your opinion about our state's priorities. Click here for a current list of
candidates.
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About Us
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Alpharesults has assembled a team with the specialized knowledge and approach required to obtain Georgia income tax credits. We are not a public accounting firm. Rather, our services complement those of public accounting firms and do not create conflicted loyalties, because our professionals do not perform attestation work or other external audit functions.
We focus on small to medium-sized businesses and work exclusively in Georgia with a wide variety of in-state and out-of-state accounting firms. For more information on our services, follow this link.
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