Beginning in 2024, Georgia imposes its sales tax on digital goods, having passed enabling legislation to do so in mid-2023. That legislation, Georgia Code Ann. § 48-8-30(a)(2) states that sales tax applies to the retail sale of “specified digital products,” “other digital goods” or “codes that are not conditioned upon continued payment by the end user” (subscriptions to digital content would typically not be taxable). Regulations to better define what types of products are subject to the sales tax have been proposed, and the public comment period ended on Dec. 19, 2024.
Details of Proposed Regulations
The proposed regulations list definitions of potentially taxable products such as digital audio-visual works (streamed or downloaded movies, TV shows, etc.), digital audio works, digital books, digital codes and other digital goods transferred electronically to an end user. The proposed regulations also identify what is considered an “end user,” “Internet Access Service,” “Prewritten Computer Software,” “Software as a Service,” “[a] Subscription” and “Transferred Electronically.”
Most importantly, if adopted in their present form, these proposed regulations would provide that any time an end user (any person receiving an electronically transferred product not received from a subscription) downloads and retains possession of a digital product, the end user is regarded as having a right of “permanent use” of the digital product, and the digital product is therefore taxable. Furthermore, the purchaser of digital products would also be considered to have “permanent use” even if the purchaser can access the products via the broadcast medium of the seller or a third party, such as an app or website.
The proposed regulations also indicate that digital products would be sourced in accordance with Georgia Code Ann. § 48-8-77, which generally requires sales of any product to be sourced to one of three possibilities: the location where the product is received, the address of the purchaser or the address from which the product was shipped, depending on what can be determined.
The proposed regulations also exclude taxation of “Internet Access Service,” “Software as a Service” and subscriptions where the end user does not have “permanent use” of the digital products, such as a service providing access to digital books that cannot be downloaded and are only accessible under a subscription. Finally, resellers of digital products who do not resell them and use the products themselves would be ultimately liable for the payment of use tax.
CBIZ Perspectives
The proposed regulations to the new Georgia law that imposes sales tax on digital goods not only specify the types of goods subject to tax but also help sellers and buyers of digital products distinguish between taxable goods and nontaxable subscriptions when the purchaser owns the digital item instead of having temporary access to it.
These regulations will likely be finalized later this year. Once finalized, these regulations will become authoritative guidance for sellers and purchasers of digital products in Georgia and establish when sales tax applies to digital product transactions.
If you are a retailer of digital products to customers in Georgia, you must ensure you comply with Georgia’s sales tax laws. If you have any questions about how the recent changes to Georgia’s sales tax law apply to you and how the forthcoming final regulations can affect your company, please connect with one of our CBIZ SALT experts.
© Copyright CBIZ, Inc. All rights reserved. Use of the material contained herein without the express written consent of the firms is prohibited by law. This publication is distributed with the understanding that CBIZ is not rendering legal, accounting or other professional advice. The reader is advised to contact a tax professional prior to taking any action based upon this information. CBIZ assumes no liability whatsoever in connection with the use of this information and assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein. Material contained in this publication is informational and promotional in nature and not intended to be specific financial, tax or consulting advice. Readers are advised to seek professional consultation regarding circumstances affecting their organization.
“CBIZ” is the brand name under which CBIZ CPAs P.C. and CBIZ, Inc. and its subsidiaries, including CBIZ Advisors, LLC, provide professional services. CBIZ CPAs P.C. and CBIZ, Inc. (and its subsidiaries) practice as an alternative practice structure in accordance with the AICPA Code of Professional Conduct and applicable law, regulations, and professional standards. CBIZ CPAs P.C. is a licensed independent CPA firm that provides attest services to its clients. CBIZ, Inc. and its subsidiary entities provide tax, advisory, and consulting services to their clients. CBIZ, Inc. and its subsidiary entities are not licensed CPA firms and, therefore, cannot provide attest services.