Are charges for computer-based electronic messaging and data-distribution services subject to Georgia sales and use tax?

Plain-English summary

A company provides computer-based electronic messaging and data-distribution services. Customers send it data electronically; the company processes the data and transmits it on to recipients over its own network, third-party carriers, and the internet. It never hands the customer any tangible property. It asked whether its charges for these services are subject to Georgia sales and use tax.

The Department said no. Georgia's rule for services is the opposite of its rule for goods: sales of tangible personal property are presumed taxable, but services are exempt unless a statute specifically names them as taxable. Data-distribution and electronic-messaging services are not among the enumerated taxable services, so the company's charges to its customers are not taxed.

There is a flip side that every service provider should note: the provider is treated as the end user and consumer of the equipment and other tangible personal property it buys to run the service. So while it doesn't charge tax to its customers, it does owe sales or use tax on the purchase price of all tangible personal property it buys to provide the service (servers, hardware, and the like).

What this means for you

Technology, data, and messaging service providers

If your offering is a non-enumerated service and you transfer no tangible property to the customer, your service charges are generally not taxable in Georgia. But budget for tax on the equipment and other tangible property you purchase to deliver the service — you pay that tax as the consumer, not your customer.

Customers buying these services

You generally will not be charged Georgia sales tax on a pure data-distribution or electronic-messaging service. If a provider bundles taxable tangible property or an enumerated taxable service, that portion could be taxed, so watch how a charge is characterized.

Accountants and tax professionals

The analysis is the standard Georgia services framework: services are non-taxable unless specifically enumerated, and the service provider bears use tax on its own inputs under Ga. Comp. R. & Regs. r. 560-12-1-.14(7)(d). Confirm that no tangible personal property is transferred to the customer and that the service isn't separately enumerated as taxable before treating the charges as exempt.

Common questions

Q: Are data-distribution and electronic-messaging service charges taxable in Georgia?
A: No. They are not among the services Georgia specifically designates as taxable, so the provider's charges for them are not subject to sales and use tax.

Q: Why are these services exempt when goods are taxed?
A: Georgia presumes sales of tangible personal property are taxable, but treats services as exempt unless a statute specifically lists them as taxable. These services are not on that list.

Q: Does the provider owe any tax at all?
A: Yes. As the end consumer, the provider owes sales or use tax on the purchase price of all tangible personal property it buys to provide the service.

Q: What if tangible property is transferred to the customer?
A: This ruling rests on the fact that the provider transfers no tangible property to customers. Transferring tangible property, or providing a separately enumerated taxable service, could change the result.

Q: Can another company rely on this ruling?
A: No. It is binding on the Department only for the taxpayer and facts presented, and no other taxpayer may rely on it.

Citations and references

Statutes and rules:

• O.C.G.A. §§ 48-8-1, 48-8-30(a) (imposition of tax; services taxable only if specifically enumerated)
• Ga. Comp. R. & Regs. r. 560-12-1-.14(7)(d) (service provider liable for tax on tangible personal property used to provide a service)

Source

• Landing page: Georgia Sales & Use Tax Letter Rulings
• Original PDF: LR SUT-2015-14

Original ruling text

Date Issued: September 22, 2015
Georgia Letter Ruling: LR SUT-2015-14
Topic: Service Provider-Computer Based Electronic Messaging
This letter is in response to your request for guidance on the application of Georgia sales and use tax to certain services
provided by Taxpayer.
Facts as Presented by Taxpayer
Taxpayers provide computer-based electronic messaging services, utilizing Taxpayer’s own network of computer
services and the public internet. Taxpayer is not regulated as a telecommunications provider by the Federal
Communications Commission or any other governmental entity. Taxpayer offers data distribution services.
Customers send data to Taxpayer electronically via the customers’ own computers and equipment via each customer’s
own internet provider or third-party telecommunications carrier. Once the data is processed, Taxpayer utilizes thirdparty communications carriers, the internet, etc. to transmit the processed data to recipients. Taxpayer does not transfer
tangible property to a customer at any time.
Issue
Are Taxpayer’s charges for data distribution services subject to the tax?
Analysis
Georgia levies and imposes a tax (subject to certain specific exemptions) on the retail purchase, retail sale, rental,
storage, use, or consumption of tangible personal property and on certain enumerated services. Unlike sales of tangible
personal property, which are generally presumed to be taxable, sales of services are exempt unless they are specifically
designated as taxable.1 Because the data distribution services are not explicitly identified as being taxable under
Georgia law, charges made for such services are not subject to the tax.
However, as end users and consumers, service providers are liable for sales and use tax on the purchase price of all
tangible personal property used in the provision of a service. 2 A provider of data distribution services is liable for the
tax on the purchase price of all tangible personal property used to provide the service.
Ruling
Based on the facts presented, Taxpayer is providing nontaxable services. However, Taxpayer owes tax on the purchase
price of all tangible personal property used to provide its data distribution services.
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.

1
2

O.C.G.A. §§ 48-8-1, -30(a).
Ga. Comp. R. & Regs. 560-12-1-.14(7)(d).