How do Georgia sales tax and title ad valorem tax apply to leased commercial trucks, non-motorized trailers, IRP vehicles, repair parts, and lease fees?

Plain-English summary

A commercial lessor bought trucks and non-motorized trailers after its customers selected the equipment, then placed them into true leases. Many trailers were pulled by trucks registered under the International Registration Plan (IRP). The Department addressed Georgia sales and use tax, title ad valorem tax (TAVT), apportioned ad valorem tax (AAVT), repair parts, sourcing, exemption records, and lease-related fees.

The principal results were:

• Lessor's equipment purchase: tax-free purchase for resale when the truck or trailer is acquired for lease inventory.
• Georgia-titled self-propelled truck: generally subject to TAVT when leased for more than 31 days to a Georgia resident who must title and register it, unless IRP-registered or otherwise exempt. A vehicle subject to TAVT is exempt from sales and use tax, including qualifying lease payments.
• Non-motorized trailer: not subject to TAVT because it is not self-propelled. Its lease is subject to sales and use tax unless another exemption applies, even when an IRP truck pulls it.
• IRP truck: not subject to TAVT, but subject to AAVT and sales and use tax unless separately exempt. Many interstate-carrier vehicles may qualify for the common-carrier exemption based on classification and use.
• Repair parts: the lessor may buy parts tax-free for resale when they become part of lease-inventory vehicles. Parts bought by the lessee are taxable unless exempt; an itemized repair invoice taxes the parts but not separately stated labor, while a single combined charge is generally fully taxable.
• Lease fees: mandatory document fees, security deposits, and advance payments are included in the associated sale's taxable sales price. Separately stated late fees and bank-passed insufficient-funds fees are not taxable. A refunded security deposit should include the related refunded tax.

What this means for you

Commercial fleet lessors

Track each asset separately by propulsion, title state, lessee residence, IRP registration, lease length, and claimed carrier exemption. Trucks and trailers in the same tractor-trailer combination can receive different TAVT and sales-tax treatment.

Interstate carriers

IRP registration alone does not create a sales-tax exemption. It removes the truck from TAVT and places it under AAVT, while sales tax still applies unless the vehicle and use satisfy a separate exemption such as the interstate common-carrier rule.

Repair and billing teams

Keep parts and labor separately stated when appropriate, and classify mandatory lease charges as part of sales price. Retain titles, registrations, IRP cab cards or paid invoices, TAVT records, purchase and lease agreements, repair invoices, exemption certificates, and Form T-146 or equivalent title evidence described by the ruling.

Common questions

Q: Does the lessor pay sales tax when buying a truck or trailer for lease?

A: No. The acquisition is a purchase for resale. The subsequent lease is the retail transaction and is taxable unless an exemption applies.

Q: When does a leased truck face TAVT instead of sales tax?

A: A self-propelled truck required to be titled and registered in Georgia generally faces TAVT; if leased for more than 31 consecutive days and TAVT applies, the related lease payments are exempt from sales tax.

Q: Are non-motorized trailers subject to TAVT?

A: No. They are not motor vehicles for TAVT, but their leases remain subject to sales tax unless another exemption applies.

Q: Does pulling a trailer with an IRP truck change the trailer's tax treatment?

A: No. The trailer remains outside TAVT and its lease remains taxable unless independently exempt.

Q: How are IRP trucks taxed?

A: They are not subject to TAVT, remain subject to AAVT, and their leases are subject to sales tax unless a separate exemption applies.

Q: Where is an interstate transportation-equipment lease sourced?

A: For qualifying transportation equipment, generally where the purchaser receives it. Other recurring-payment vehicle leases are sourced to the primary property location in the lessor's ordinary records.

Q: Which extra charges enter the sales-tax base?

A: Mandatory document fees, security deposits, and advance payments. Separately stated late and qualifying insufficient-funds fees do not.

Q: Can another lessor rely on this ruling?

A: No. The eleven answers are limited to the requesting lessor's equipment, leases, registrations, fees, and represented facts.

Citations and references

Key authorities:

• O.C.G.A. § 48-5C-1 and § 48-5-442.1 -- TAVT and AAVT
• O.C.G.A. § 48-8-3(33)(A), (95) -- common-carrier and TAVT-related sales-tax exemptions
• O.C.G.A. § 48-8-30(d)(1) and § 48-8-77(b) -- lease tax and sourcing
• O.C.G.A. § 48-8-2(34) -- sales price
• O.C.G.A. § 48-8-38 and § 48-8-52 -- exemption certificates and records
• Ga. Comp. R. & Regs. r. 560-12-2-.10(2), -.19(3), and -.78 -- lessor resale purchases, common carriers, and repairs

Source

• Landing page: Georgia Sales & Use Tax Letter Rulings
• Original PDF: LR SUT-2017-03

Original ruling text

Georgia Letter Ruling: LR SUT-2017-03
Dated: February 21, 2017
Topic: Motor Vehicle Leases - International Registration Plan

This letter is in response to your request for guidance as to the proper application of Georgia sales and use tax and
title ad valorem tax to transactions by your client, [Redacted] (“Taxpayer”).
Facts as Presented by Taxpayer
Business Activities
Taxpayer is in the business of leasing commercial tractor trucks (“trucks”), non-motorized trailers (“trailers”), or a
combination thereof. The leased trucks are generally Class 8 trucks,1 and the leased trailers do not have a front axle.
A tractor trailer is a combination trucking unit, consisting of a Class 8 truck hooked up to a trailer. In addition to trucks
and trailers, Taxpayer, on occasion, leases other types of commercially titled vehicles such as dump trucks and delivery
trucks.
All leases are true leases and not finance arrangements. The amount for which Taxpayer purchases a truck or trailer
(collectively “equipment”) to place on lease with a customer is less than the sum of payments collected during the
lease term. All leases have a residual, which is either fair market value or a pre-negotiated purchase price in excess of
10% of the original funded amount. The lessee can renew, purchase, or return the equipment at the end of the lease.
Transactions
Transactions generally occur in the following manner:
When a business desires to lease equipment, the business contacts Taxpayer for assistance in acquiring use of the
equipment and completes an application. Once the application is approved, the lessee works with a dealer to select the
needed equipment and to negotiate the price. Taxpayer is not the primary party in these negotiations.
Thereafter, the lessee and Taxpayer agree to final terms, and a lease agreement is executed. Once the final terms are
agreed upon and the lease agreement is executed, funds are sent from Taxpayer to the dealer to purchase the equipment.
Taxpayer works with the appropriate Georgia County to title the equipment under a related statutory trust. Most
trailers are pulled by trucks that are registered under the International Registration Plan (“IRP”).
The lessee is responsible for major repairs on the leased equipment pursuant to the lease agreement; however, if the
lessee needs help funding the repairs, an application for a wrap lease can be submitted for Taxpayer to fund the repair
cost and incorporate the repair cost into the lease through revised payment terms. Currently, Georgia sales and use tax
is paid to the person performing the repair for the parts.
Issues
1.

Are trucks purchased by Taxpayer and leased to lessees in Georgia subject to title ad valorem tax (“TAVT”)?

2.

Are trucks purchased by Taxpayer and leased to lessees in Georgia subject to Georgia sales and use tax?

3.

Are trailers purchased by Taxpayer and leased to lessees in Georgia subject to TAVT?

4.

Are trailers purchased by Taxpayer and leased to lessees in Georgia subject to Georgia sales and use tax?

5.

Are trucks registered under the IRP subject to TAVT?

6.

Are trucks registered under the IRP subject to Georgia sales and use tax?

1

The Class 8 truck is a vehicle with a gross vehicle weight rating exceeding 33,000 pounds.

LR SUT-2017-03
February 21, 2017
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7.

Are leased trailers that are pulled by trucks registered under the IRP subject to TAVT?

8.

Are leased trailers that are pulled by trucks registered under the IRP subject to the Georgia sales and use tax?

9.

What is the appropriate sales and use tax application for repair parts purchased from and installed by unrelated
mechanics? Can the parts be purchased for resale by Taxpayer?

10. For each of the situations above where Taxpayer is exempt from either TAVT or sales and use tax, what
    documentation should Taxpayer keep on file to adequately support the exemption during an audit?
11. Are document fees, late fees, non-sufficient funds fees, security deposits, and advance payments exempt from
    Georgia sales and use tax?
    Analysis
    Sales and Use Tax
    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.2 A “retail sale” is any
    sale, lease, or rental for any purpose other than for resale, sublease, or subrent. 3 A “sale” occurs when there is a transfer
    of title or possession, transfer of title and possession, exchange, barter, lease, or rental, conditional or otherwise, of
    any kind of tangible personal property for a consideration. 4
    When Taxpayer purchases a truck or trailer for the purpose of leasing such equipment to a lessee, that purchase
    transaction is a non-taxable sale for resale rather than a taxable retail sale. The subsequent lease is a retail sale of
    tangible personal property subject to sales and use tax unless exempt.
    Georgia law provides a sales and use tax exemption for the sale or purchase of any motor vehicle titled in Georgia on
    or after March 1, 2013, pursuant to Code Section 48-5C-1 (i.e., any motor vehicle subject to TAVT as described
    below).5 Under this exemption, lease payments for a motor vehicle for which TAVT is paid are also exempt from
    sales and use tax if the motor vehicle is leased for more than 31 consecutive days.6 Additionally, Georgia sales and
    use tax does not apply to motor vehicles and their major components that will be used principally to cross the borders
    of this state in the service of transporting passengers or cargo by common carriers and by carriers who hold common
    carrier and contract carrier authority in interstate or foreign commerce under authority granted by the United States
    government.7
    If sales and use tax is due on a lease or rental transaction, the person to whom tangible personal property is leased is
    liable for sales and use tax on the lease at the applicable rate multiplied by the “sales price.”8 The tax shall be paid to
    the lessor by the lessee.9

2

O.C.G.A. §§ 48-8-1, 48-8-2(31)(A), and 48-8-30.
O.C.G.A. § 48-8-2(31).
4
O.C.G.A. § 48-8-2(33)(A).
5
O.C.G.A. § 48-8-3(95).
6
O.C.G.A. § 48-8-3(95). This sales and use tax exemption does not apply to the rental of motor vehicles for period of
31 or fewer consecutive days.
7
O.C.G.A. § 48-8-3(33)(A); Ga. Comp. R. & Regs. r. 560-12-2-.19(3). The exemption also applies to replacement
parts which become an integral part of a common carrier’s equipment or vehicles. Common carriers purchasing
tangible personal property under this exemption must register and file sales and use tax returns and must furnish each
supplier of exempt tangible property with a certificate of exemption. Ga. Comp. R. & Regs. r. 560-12-2-.19.
8
O.C.G.A. § 48-8-30(d)(1).
9
Id.
3

LR SUT-2017-03
February 21, 2017
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The term “sales price” means the total amount of consideration, including cash, credit, property, and services, for
which personal property or services are sold, leased, or rented, valued in money, whether received in money or
otherwise, without any deduction for the seller’s expenses, charges by the seller for any services necessary to complete
the sale, and delivery charges.10 “Sales price” also includes document fees, security deposits, and advance payments
that are necessary for the completion of the sale. Additional charges for insurance that is not required by the seller,
late fees, and insufficient funds fees passed on from a bank are not required to complete the sale and are not subject
to sales tax if separately stated. “Sales price” also excludes interest, financing, and carrying charges from credit
extended on the sale of personal property, if the amount is separately stated on the invoice, bill of sale, or similar
document given to the purchaser.11
Sales and Use Tax Sourcing of Lease Transactions
A lease of transportation equipment is sourced in the same manner as a retail sale, meaning it is generally sourced to
the location where receipt by the purchaser occurs. 12 “Transportation equipment” includes trucks and truck-tractors
with a Gross Vehicle Weight Rating of 10,001 pounds or greater, trailers, semitrailers, or passenger buses that are
registered through the International Registration Plan and operated under authority of a carrier authorized and
certificated by the U.S. Department of Transportation or another federal authority to engage in the carriage of persons
or property in interstate commerce.13 Thus, Taxpayer’s Class 8 trucks, which are vehicles that exceed 33,000 pounds,
will generally be sourced to the location where receipt by the purchaser occurs, so long as the vehicle is registered
through the IRP and operated under authority of a carrier properly authorized and certificated to engage in the carriage
of persons or property in interstate commerce.
A lease of motor vehicles, trailers, semitrailers, or aircraft that do not qualify as transportation equipment is sourced
to the primary property location if the lease is one that requires recurring periodic payments. 14 The primary property
location is indicated by an address for the property provided by the lessee that is available to the lessor from records
maintained in the ordinary course of business. This location will not be altered by intermittent use at different
locations.15
Sales and Use Taxation of Repair Parts
Taxpayer, as lessor, may purchase tax free for resale any automobiles, trucks, trailers, repair parts, tires and accessories
that become a part of the vehicles to be leased to other persons.16 This rule applies regardless of whether the subsequent
lease qualifies for a sales and use tax exemption.
When lessees repair leased vehicles, the replacement parts, materials, and supplies used or consumed by repairmen
are taxable either to the repairman or to the lessees.17 If the repairman does not state separately, itemize, or segregate
at a fixed or retail price the materials and supplies used in performing repairs, sales and use tax generally applies to
the total charge for such materials and labor.18 If the repairman does separate, itemize, and invoice at a retail selling
price the parts, materials and supplies used, stating separately the amount for labor, sales and use tax will apply only

10

O.C.G.A. § 48-8-2(34)(A).
O.C.G.A. §§ 48-8-2(34)(B) and 48-8-30.
12
O.C.G.A. § 48-8-77(b)(1) and (4).
13
O.C.G.A. § 48-8-77(b)(4)(B).
14
O.C.G.A. § 48-8-77(b)(3)(A).
15
Id.
16
Ga. Comp. R. & Regs. r. 560-12-2-.10(2).
17
Ga. Comp. R. & Regs. r. 560-12-2-.78(1). Even when a transaction is otherwise taxable to the lessee, that lessee
may assert a sales and use tax exemption, if applicable. For example, a common carrier may make exempt purchases
of vehicles and major components of vehicles when the item will be used principally to cross the borders of this state
in transporting passengers or cargo. In such a case, the lessee asserting the exemption must present a properly
completed certificate of exemption to the repairman.
18
Ga. Comp. R. & Regs. r. 560-12-2-.78(1)(a).
11

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February 21, 2017
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to the retail selling price of the parts, materials and supplies listed and itemized.19
Sales and Use Tax Documentation
All sales are subject to sales and use tax until the contrary is established. The burden of proof that a sale is not subject
to the tax is upon the person who makes the sale, unless he takes from the purchaser a valid certificate of exemption.20
The certificate relieves the seller from the burden of proof if the seller, in good faith, acquires from the purchaser a
properly completed certificate. A properly completed certificate taken in good faith means a seller must obtain a
certificate: (i) that is fully completed, including, but not limited to, the name, address, a valid sales tax number (when
a sales tax number is required), and signature of the taxpayer (when required); (ii) in a form appropriate for the type
of exemption claimed; (iii) claiming an exemption that was statutorily available on the date of the transaction in the
jurisdiction where the transaction is sourced; (iv) claiming an exemption that could be applicable to the item being
purchased; and (v) claiming an exemption that is reasonable for the purchaser’s type of business.21
The certificate relieves the seller from the burden of proof on sales for resale if the seller acquires from the purchaser
a properly completed certificate, taken in good faith, from a purchaser who (i) is engaged in the business of selling
tangible personal property; (ii) has a valid sales tax registration number at the time of purchase and has listed his or
her sales tax number on the certificate; and (iii) at the time of purchasing the tangible personal property, the seller has
no reason to believe that the purchaser does not intend to resell it in his or her regular course of business. 22 Dealers
must maintain records to support all purchases and sales for a period of no less than three years. 23
Title Ad Valorem Tax
Motor vehicles that are required to be registered and titled in Georgia under O.C.G.A. §§ 40-2-8 and 40-2-20 on or
after March 1, 2013 are subject to a state and local TAVT pursuant to O.C.G.A. § 48-5C-1.24 As discussed above, the
sale or purchase of a motor vehicle subject to TAVT is exempt from sales and use tax. “Motor vehicles,” for purposes
of TAVT, means all vehicles that are self-propelled.25 Since TAVT only applies to self-propelled vehicles titled in
Georgia, non-motorized trailers are not subject to TAVT and, thus, remain subject to sales and use tax unless otherwise
exempt.26
A lessee residing in Georgia who leases a motor vehicle for more than 31 consecutive days must register the motor
vehicle with the tag agent in that lessee’s county of residence within 30 days of the commencement of the lease of
such motor vehicle or beginning residence in this state, whichever is later. 27
In the event that a lessee qualifies for a TAVT exemption as provided by statute, the exemption will flow from the
lessee to Taxpayer as part of the lease.28 Accordingly, the title and corresponding payment of TAVT should be
processed with said exemption.29 The documentation and procedures required to process these exemptions, or to claim
a refund under this policy, are the same as the documentation required to process these exemptions as part of a sale or
purchase.30

19

Ga. Comp. R. & Regs. r. 560-12-2-.78(1)(b).
O.C.G.A. § 48-8-38(a).
21
O.C.G.A. § 48-8-38(b); see also Ga. Comp. R. & Regs. r. 560-3-2-.27 (the guidance related to electronic signatures
for tax returns typically extends to certificates of exemption).
22
O.C.G.A. § 48-8-38(c).
23
O.C.G.A. § 48-8-52(a)(1)(D).
24
O.C.G.A. § 48-5C-1(b)(1)(A).
25
Ga. Const. Art. VII, § I, Para. III(b)(3).
26
O.C.G.A. §§ 48-5C-1(b)(1)(A) and 40-1-1(33); Ga. Comp. R. & Regs. r. 560-11-14-.01(1)(k).
27
O.C.G.A. § 48-5C-1(d)(14)(B).
28
Title Ad Valorem Tax Informational Bulletin Exemptions for Leases issued May 31, 2013.
29
Id.
30
Id.
20

LR SUT-2017-03
February 21, 2017
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International Registration Plan
The IRP is a reciprocity agreement between member states that allows vehicles travelling in multiple member states
to register only with the member state where the vehicle is based. Motor vehicles registered under the IRP are not
subject to TAVT but are subject to apportioned ad valorem taxation (“AAVT”) and sales and use tax unless exempt.31
Although vehicles registered under the IRP are subject to sales and use tax, many of these vehicles, depending on their
classification and use, may qualify for the common carrier sales and use tax exemption discussed above.32
Rulings
1.

When a truck is purchased by Taxpayer for the purpose of leasing it to third parties and subsequently is leased for
over 31 days to a Georgia resident who is required to register and title that motor vehicle in Georgia, the truck is
subject to TAVT unless the truck is registered under the IRP or otherwise exempt from TAVT.
If the lessee qualifies for a TAVT exemption, the exemption will flow from the lessee to the lessor as part of the
lease, and the title should be processed with the appropriate exemption.

2.

Taxpayer’s purchase of the truck for the purposes of leasing it to third parties is a purchase for resale and,
accordingly, not subject to sales and use tax. When Taxpayer leases the truck, the lease payments paid by lessees
to Taxpayer are subject to sales and use tax unless an exemption applies. If the truck is subject to TAVT, as
provided above, it is exempt from Georgia sales and use tax.
If a truck has a Gross Vehicle Weight Rating exceeding 10,001 pounds and is properly authorized and certificated
to engage in interstate commerce, that equipment is considered transportation equipment, and the sales tax rate is
determined according to the location where receipt by the purchaser occurs. If the leased vehicle does not qualify
as transportation equipment, its sales and use tax rate is determined by primary property location if the lease
requires recurring periodic payments.
A lessee who qualifies for a sales and use tax exemption, such as the common carrier exemption, must provide
Taxpayer a properly executed certificate of exemption that is accepted in good faith by Taxpayer.

3.

For TAVT purposes, non-motorized trailers are not motor vehicles and thus are not subject to TAVT. Taxpayer
should maintain documentation to show that the property leased is a non-motorized trailer.

4.

Because Taxpayer purchases non-motorized trailers to be leased, this purchase is for resale and thus not subject
to sales and use tax. Taxpayer’s subsequent lease of a non-motorized trailer to a lessee is subject to sales and use
tax unless otherwise exempt. A lessee qualifying for sales and use tax exemption must provide Taxpayer a
properly executed exemption document that is accepted in good faith by Taxpayer.

5.

A truck registered under the IRP is not subject to TAVT. Such a vehicle remains subject to AAVT while registered
under the IRP.

6.

A leased truck registered under the IRP is subject to Georgia sales and use tax unless an exemption applies. When
Taxpayer purchases trucks for the purpose of leasing such equipment to lessees, that purchase is a non-taxable
sale for resale rather than a taxable retail sale. The subsequent lease is a retail sale of tangible personal property
subject to sales and use tax unless exempt. A lessee qualifying for sales and use tax exemption must provide
Taxpayer a properly executed certificate of exemption that is accepted in good faith by Taxpayer.

7.

For TAVT purposes, non-motorized trailers are not motor vehicles and thus are not subject to TAVT regardless
of whether the non-motorized trailer is pulled by a truck registered under the IRP.

31
32

O.C.G.A. §§ 48-5-442.1, 48-5C-1(b)(1)(A), and 48-8-3.
O.C.G.A. § 48-8-3(33)(A); Ga. Comp. R. & Regs. r. 560-12-2-.19(3).

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February 21, 2017
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8.

Because Taxpayer purchases non-motorized trailers to be leased to third parties, these purchases are for resale
and thus not subject to sales and use tax. Regardless of whether the non-motorized trailer is pulled by a truck
registered under the IRP, Taxpayer’s lease of a non-motorized trailer to a lessee is subject to sales and use tax
unless otherwise exempt. A lessee qualifying for sales and use tax exemption must provide Taxpayer a properly
executed certificate of exemption that is accepted in good faith by Taxpayer.

9.

Based on the facts provided, Taxpayer may purchase repair parts tax free for resale when the parts purchased will
become part of a truck or trailer held in Taxpayer’s lease inventory. To purchase repair parts exempt for resale,
Taxpayer must provide the seller with a properly executed certificate of exemption that is accepted by the seller
in good faith. Taxpayer should keep invoices documenting such purchases.
If purchased by a lessee, repair parts are taxable to lessee unless otherwise exempt. If the repair invoice separately
states the cost of labor, sales and use tax only applies to the repair parts. If the repair invoice has one charge, sales
and use tax generally applies to the total charge for repair parts and labor. Lessees should keep invoices
documenting such purchases.

10. In addition to the documentation indicated above, Taxpayer should keep invoices and proof of payment for
    purchases of trucks and trailers, proof of title and registration, invoices and proof of payment for repair parts,
    proof of payment of TAVT, proof of IRP registration (paid IRP invoice or valid current cab card), copies of all
    agreements concerning the purchase and lease of any truck or trailer, and proof of any application or registration
    submitted to the Department or other agency. With respect to the TAVT exemption for IRP vehicles titled in
    Georgia, Form T-146 must be completed and attached to the application for the certificate of title, and Taxpayer
    should maintain a copy of the T-146 or the title receipt reflecting the IRP exemption to TAVT.
11. Georgia’s statutory definition of “sales price” requires that mandatory charges made by the seller be included in
    sales and use tax base of the associated sale. Thus, document fees, security deposits, and advance payments must
    be included in the sales price and are taxable in the same manner as the associated sale. Likewise, late fees and
    non-sufficient funds fees, which are akin to interest or carrying charges rather than charges for the purchase of
    the property, are not subject to sales and use tax so long as they are separately stated on documentation provided
    to the lessee. Further, any refund of a security deposit should include the amount of tax associated with the
    amount of the security deposit refunded.
    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.