The State of Georgia has implemented a 4-year phase-out of sales and use tax on energy used to manufacture tangible personal property for NAICS manufacturers.

Phase-Out

The 4-year phase-out of sales and use tax on the sale, use, storage, or consumption of energy* used to manufacture tangible personal property in Georgia is scheduled as follows:

• From January 1, 2013, through December 31, 2013, a 25% exemption is in effect with regard to the 4% state sales and use tax rate and any 1% local sales and use tax (other than any 1% educational local option sales and use tax).
• From January 1, 2014, through December 31, 2014, the above 25% exemption increases to 50%.
• From January 1, 2015, through December 31, 2015, the exemption increases to 75%.
• On January 1, 2016, the exemption increases to 100%.

Those qualifying for full or a partial exemption under the above phase-out schedule must certify to the seller that the exemption applies.

O.C.G.A. Sec. 48-8-3.2(c)(1)

Effective March 5, 2013, a dealer that performs both manufacturing and agricultural operations at a single place of business can use exemptions under either O.C.G.A. Sec. 48-8-3.2 for manufacturers, or O.C.G.A. Sec. 48-8-3.3 for qualified agriculture producers for that one place of business in any one calendar year. (O.C.G.A. Sec. 48-8-3.3(f)).

Phase-In

A 4-year phase-in of an excise tax on the sales or use of energy by municipalities and newly created “special districts” affected by the phase-out is scheduled as follows:

• From January 1, 2013, through December 31, 2013, the excise tax rate equals 25% of the total local sales and use tax in effect in the special district that would be collected if not for any phase-out exemption described above. In this context, “local sales and use tax” means the county special purpose local option tax, the joint county and municipal tax, the homestead option tax, the water and sewer projects and costs tax, and those sales and use taxes levied for purposes of a metropolitan system of public transportation.
• From January 1, 2014, through December 31, 2014, the 25% excise tax rate increases to 50%.
• From January 1, 2015, through December 31, 2015, the 50% excise tax rate increases to 75%.
• On January 1, 2016, the 75% excise tax rate increases to 100%. The maximum rate for the excise tax on this date is 2% as a general rule, or 3% if a municipality also imposes a water and sewer projects and costs tax. If the total rate of local sales and use taxes in effect in a special district decreases from 2% to 1% or increases from 1% to 2%, the rate of this excise tax will likewise be reduced or increased at the same time. The excise tax is capped at 2%.

(O.C.G.A. Sec. 48-13-110; O.C.G.A. Sec. 48-13-112(a)(3), (d); O.C.G.A. Sec. 48-13-116(c))

EFFECTIVE DATE: January 1, 2013 for services regularly billed on a monthly basis.

* For purposes of the phase-out, “energy” means natural or artificial gas, oil, gasoline, electricity, solid fuel, wood, waste, ice, steam, water, and other materials necessary and integral for heat, light, power, refrigeration, climate control, processing, or any other use in any phase of the manufacture of tangible personal property.

“Energy” does not include energy purchased by a manufacturer that is primarily engaged in producing electricity for resale. (O.C.G.A. Sec. 48-8-3.2(a)(2))

Source: CCH Weekly. State Tax Guide,[¶60-510],Georgia, Manufacturing, Processing, Assembling, or Refining. April 30, 2013.

If you would like additional information on this topic or have any questions, please contact the taxdesk@thesaltgroup.com