May a Georgia flooring manufacturer use the discounted carpet-sample valuation method for laminate or other floor-covering samples?

Plain-English summary

The special discounted fair-market-value method for calculating use tax on self-manufactured carpet samples applied only to carpet. A laminate-flooring manufacturer could not extend that method to laminate or other floor-covering samples.

Georgia treated the carpet-sample rule as a partial exemption. Because tax exemptions must be clearly stated and strictly construed, the Department could not broaden the statute administratively. Any expansion to other floor coverings required action by the General Assembly.

Common questions

Q: Did similar use as a customer sample make laminate flooring eligible?

A: No. The statute specifically covered carpet samples, not all products serving the same display or sampling purpose.

Q: Could the Department replace "carpet" with "floorcovering" by interpretation?

A: No. The ruling said the General Assembly must decide whether and how to expand the treatment.

Citations and references

• O.C.G.A. §§ 48-8-30(a), (c)(1) -- sales and use tax imposition
• O.C.G.A. § 48-8-39(b) -- fair-market-value method for self-manufactured carpet samples
• O.C.G.A. § 48-2-1 -- Department administration and enforcement authority
• Ga. Comp. R. & Regs. r. 560-12-1-.18 -- strict construction of exemptions
• Georgia Department of Revenue v. Owens Corning, 283 Ga. 489 (2008) -- strict construction of tax exemptions

Source

• Landing page: Georgia Sales & Use Tax Letter Rulings
• Original PDF: LR SUT-2012-04

Original ruling text

State of Georgia
Douglas J. MacGinnitie
Commissioner

Department of Revenue

Administrative Division – Office of Tax Policy
1800 Century Blvd., Suite 15107
Atlanta, Georgia 30345-3205
(404) 417-6649

Frank M. O’Connell
Director

August 23, 2012

Georgia Letter Ruling SUT No. 2012-08-23-01 Withdrawal from Inventory

This letter is in response to your request for a letter ruling on the application of O.C.G.A. § 48-839 to flooring samples.
Facts
Taxpayer has a manufacturing facility in Georgia where it manufactures laminate flooring.
The manufactured product is sold to end users in a case. Sample pieces, are displayed in stores,
and much smaller samples are available for customers to take with them.
Taxpayer argues that the methodology for computing tax on carpet samples should be applied to
other flooring industry samples. Taxpayer asks the Department to consider amending O.C.G.A.
§48-8-39(b) to include the wording “floorcovering” in place of “carpet.”
Issue
Does the methodology contained in O.C.G.A. §48-8-39(b) for calculating use tax due on selfmanufactured carpet samples apply to other types of floor coverings?
Analysis
Georgia sales tax is imposed on the retail purchase, retail sale, rental, storage, use, or
consumption of tangible personal property and on the services described in this article. 1 Use tax
is generally imposed on the first instance of use, consumption, distribution, or storage within this
state of tangible personal property purchased at retail outside this state. 2
If a person who engages in the business of processing, manufacturing, or converting industrial
materials into articles of tangible personal property for sale, whether as custom-made or stock
1
2

O.C.G.A. § 48-8-30(a).
O.C.G.A. § 48-8-30(c)(1).

An Equal Opportunity Employer

August 23, 2012
Page 2 of 3

items, makes any use of the article of tangible personal property other than retaining,
demonstrating, or displaying it for sale, the use shall be deemed a retail sale as of the time the
article is first used by such person and its fair market value at the time shall be deemed the sales
price of the article. 3 However, pursuant to O.C.G.A. § 48-8-39(b), the fair market value used to
calculate the use tax remitted on a carpet sample is discounted depending upon whether the
carpet sample use is residential or commercial. 4 The Georgia Code does not specifically provide
a discounted fair market value rate for other types of floor coverings.
The Georgia constitution states that "the General Assembly shall have the power to make all
laws not inconsistent with this Constitution, and not repugnant to the Constitution of the United
States, which it shall deem necessary and proper for the welfare of the state." 5 The Department
of Revenue’s function is to “administer and enforce the revenue laws of this state and such other
laws as may be specifically assigned by law to the department or to the commissioner.” 6 Thus,
the General Assembly makes the laws, and the Department administers and enforces those laws.
By defining the fair market value of carpet samples to be either 21.9 percent or one percent of
the total raw material cost of the sample, the General Assembly has effectively provided a partial
exemption for such samples, and when the General Assembly enacts a sales tax exemption, that
exemption is strictly construed, and will not be granted unless the relevant statute clearly and
distinctly shows that such was the plain and unambiguous intention of the General Assembly. 7
The standards for reviewing taxation statutes are well-settled:
Taxation is the rule, and exemption from taxation [is] the exception. And
exemptions are made, not to favor the individual owners of property, but in the
advancement of the interests of the whole people. Exemption, being the exception
to the general rule, is not favored; but every exemption, to be valid, must be
expressed in clear and unambiguous terms, and, when found to exist, the
enactment which it is given will not be enlarged by construction, but, on the
contrary, will be strictly construed. 8
Rulings
The General Assembly’s intention in O.C.G.A. §48-8-39 is clear and distinct in that the
discounted fair market value rate for calculating the amount of use tax to be remitted is only
applicable to carpet samples. The relevant exemption does not apply to all floor coverings, and it

3

O.C.G.A. § 48-8-39(b)(1)(A).
“The fair market value of any carpet sample shall be equal to 21.9 percent of the total raw material cost of the
sample, except that the fair market value of a sample of carpet that is manufactured exclusively for commercial use
shall be equal to 1 percent of the total raw material cost of the sample.” O.C.G.A. §48-8-39(b).
5
GA Const. art. III, § VI, par. I.
6
O.C.G.A. § 48-2-1.
7
Ga. Comp. R. & Regs. r. 560-12-1-.18.
8
GA Dep’t. of Rev. v. Owens Corning, 283 Ga. 489 (2008); see also Southwire Company v. Chilivis, 139 Ga. App.
329 (1976) (explaining that in interpreting tax exemptions all doubts must be resolved in favor of the taxing
authority).
4

An Equal Opportunity Employer

August 23, 2012
Page 3 of 3

is up to the General Assembly to decide whether, when, and to what extent the tax treatment of
self-manufactured carpet samples should be expanded to other floor coverings.
The opinions expressed in this ruling are based upon the information contained in your request
and limited to the specific transactions and taxpayer in question. Should the circumstances
regarding the transactions change, or differ materially from those represented, then this ruling
may become invalid. In addition, please be advised that subsequent statutory or administrative
rule changes or judicial interpretations of the Statutes or Rules upon which this advice is based
may subject similar future transactions to a different tax treatment than that expressed in this
response.

An Equal Opportunity Employer