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Introduction. The sale and use of certain computer system hardware is exempt from sales tax. Computer system hardware that qualifies for the exemption may be purchased, rented, or leased using Form ST-121.3, Exemption Certificate For Computer System Hardware.
Unofficial guidance previously given by the Department of Revenue stated that it is generally tax-exempt, similar to most other services, so long as the purchaser does not download or possess the software in any way, and is only accessing it via a third party or the seller's servers.
The sale, use and storage of machinery or equipment that is necessary and integral to the manufacture of tangible personal property are exempt from sales and use tax. 3. Be necessary and integral to the manufacture of tangible personal property for sale, for promotional use, or further manufacturing.
In other words, Software-as-a-Service as a cloud-computing program that is only accessed remotely without delivery of a tangible media and does not include the user taking possession of the program is not subject to sales or use tax.
Lawmakers in Georgia are looking to extend the state's sales and use tax to digital goods and services. If House Bill 594 is enacted as written, audiovisual works, electronic books, video games, and a host of other digital products and services would be subject to sales and use tax starting July 1, 2021.
The majority of states which have addressed the issue and have concluded that software (at least unbundled software) is not tangible personal property for ad valorem tax purposes and therefore is generally not taxable.
Goods that are subject to sales tax in Georgia include physical property, like furniture, home appliances, and motor vehicles. Groceries, prescription medicine, and gasoline are all are tax-exempt. Some services in Georgia are subject to sales tax.
Georgia does not impose sales and use tax on SaaS, cloud-based services or hosting services. Prewritten computer software, delivered either electronically or through load and leave is also not subject to tax in the state, nor are computer related services, including information and data processing services.
Georgia exempts sales and use taxes on a wide range of expenditures made by manufacturers. These include purchases of the following if they are integral to the manufacturing process: Machinery and equipment. Repair and replacement parts.
Software maintenance agreements that are separately stated from the sale of prewritten software and include updates,upgrades, or enhancements delivered via tangible medium and include support services are deemed to be taxable at 50% of the software maintenance agreement's total stated sales price per GA Comp. R.