Can a service organization claim Georgia's manufacturing exemption for leased printing equipment used by a small internal print division?

Plain-English summary

The organization did not qualify as a manufacturer for Georgia's machinery-and-equipment exemption. Its primary business was an unrelated service, while the printing and design operation was a small internal division rather than a separate legal entity and generated only a small percentage of total revenue.

Even though the division leased printing equipment, sold printed materials to the public, and collected sales tax on those retail sales, the taxpayer's primary service activity controlled its classification. Businesses primarily engaged in personal or professional services were not manufacturers under the cited exemption.

Common questions

Q: Did collecting sales tax on printed products prove manufacturer status?

A: No. The ruling focused on the taxpayer's primary business, not merely the fact that one division produced taxable printed goods.

Q: Did nonprofit status itself decide the case?

A: The stated reason was that the taxpayer was primarily a service provider and the print division was not a separate entity.

Citations and references

• O.C.G.A. § 48-8-3.2(b), (10)(A)-(B) -- manufacturing exemption and manufacturer definition

Source

• Landing page: Georgia Sales & Use Tax Letter Rulings
• Original PDF: LR SUT-2014-19

Original ruling text

Date Issued:
January 29, 2015
Georgia Letter Ruling: LR SUT-2014-19
Topic: Manufacturing Exemption
This letter is in response to your request for guidance on the application of Georgia sales and use tax on transactions
involving the lease of printing equipment by a business engaged in the printing and design of tangible personal
property for resale which is owned and operated by the Taxpayer who is primarily engaged in an unrelated service.
Facts Presented by Taxpayer
Taxpayer is primarily engaged in an unrelated service. Taxpayer is a 501(c)(3) organization for federal income tax
purposes. The North American Industry Classification System (“NAICS”) code assigned to Taxpayer reflects the
501(c)(3) status attributable to their primary service, rather than its printing and design division, which is not a
separate legal entity. The printing division is located at the Taxpayer’s location of business, and its primary function
is the printing and reproduction of materials sold to the general public. Taxpayer leases printing equipment used to
produce the tangible personal property it sells. Sales tax is collected on the retail sale of the printed items when sold
by Taxpayer. The printing and design business’s gross revenue is a small percentage of Taxpayer’s total revenue.
Issue
Is Taxpayer a “manufacturer” for purposes of qualifying for the sales and use tax exemptions provided by O.C.G.A.
§ 48-8-3.2?
Analysis
Georgia levies and imposes a tax (subject to certain specific exemptions) on the retail purchase, retail sale, storage,
use, or consumption of tangible personal property, certain enumerated services, and utilities. 1 Effective January 1,
2013, exemptions apply to the sale, use, or storage of machinery and equipment that are necessary and integral to the
manufacture of tangible personal property, industrial materials, and packaging supplies. 2
Georgia code section 48-8-3.2 and Ga. Comp. R. & Regs. r. 560-12-32-.32 substantially define the term
“manufacturer” in the same manner as follows:
(10) “Manufacturer” means a person or business, or a location of a person or business that is
engaged in the manufacture of tangible personal property for sale or further manufacturing. To be
considered a manufacturer, the person or business, or the location of a person or business, must be:
(A) Classified as a manufacturer under the 2007 North American Industrial Classification System
Sectors 21, 31, 32, or 33, or North American Industrial Classification System industry code 22111
or specific code 511110; or
(B) Generally regarded as being a manufacturer.
Businesses that are primarily engaged in providing personal or professional services or in the
operation of retail outlets, generally including, but not limited to, grocery stores, pharmacies,
bakeries, or restaurants, are not considered manufacturers. 3
Taxpayer is primarily engaged in the provision of an unrelated services; for this reason, Taxpayer is not a
manufacturer for purposes of Georgia’s sales and use tax exemptions provided by O.C.G.A. § 48-8-3.2.

1

O.C.G.A. §§ 48-8-1, 48-8-2(31)(A), and 48-8-30(a).
O.C.G.A. § 48-8-3.2(b), effective 1/1/2013.
3
O.C.G.A. § 48-8-3.2(10)(A)(B).
2

January 29, 2015
LR SUT-2014-19
Manufacturing Exemption
Page 2 of 2

Ruling
Businesses that are primarily engaged in providing personal or professional services are not considered
manufacturers. Because Taxpayer is primarily engaged in the provision of unrelated services Taxpayer is not a
manufacturer and does not qualify for the sales and use tax exemptions provided by O.C.G.A. § 48-8-3.2.
The opinions expressed in this ruling are based upon the information contained in your request and limited to the
specific transactions, facts, circumstances 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.