Can a Georgia copy shop buy or lease self-service copiers tax-free for resale or claim the manufacturing-equipment exemption?

Plain-English summary

An equipment finance company leased copiers and printers to retail copy shops. Customers used the machines for self-service copying and paid per page, but they did not sign equipment leases or receive full possession or control of the machines.

The Department ruled that the copy shop was not reselling or renting the equipment to customers. Limited use at the shop's location and under the shop's conditions did not amount to a transfer of possession or control for a term. The shop therefore could not acquire the equipment tax-free for resale.

The manufacturing exemption also failed. Retail copy shops were business-service centers providing photocopying and document-copying services, did not fall within a qualifying NAICS manufacturing sector or code, and were not generally regarded as manufacturers.

What this means for you

Copy shops and business-service centers

Per-use customer access to a machine is not necessarily a lease. If customers do not receive possession or control of the equipment, the business is using the machine to provide a service and must pay tax on acquiring it.

Equipment lessors

Your customer may lease equipment from you, but that does not mean the customer is subleasing it to end users. Test the end user's rights to possession and control before accepting a resale exemption.

Accountants and tax professionals

The resale and manufacturing questions are separate, and both failed here. Copy shops were classified as business-service centers rather than manufacturers, regardless of the physical production of paper copies.

Common questions

Q: Is a per-page copier charge a rental charge?
A: Not here. Customers had only limited use at the shop and did not receive full possession or control of the equipment for a term.

Q: Can the copy shop buy the copier tax-free for resale?
A: No. Because it did not lease or rent the copier to customers, the shop was the taxable user of the equipment.

Q: Is a copy shop a manufacturer because it produces copies?
A: No under this ruling. It was a retail business-service center outside the qualifying manufacturing classifications and not generally regarded as a manufacturer.

Q: Can another copy shop rely on this ruling?
A: No. It is limited to the requesting taxpayer and facts, including the per-page model and customer-control limits.

Citations and references

Statutes and rules:

• O.C.G.A. § 48-8-30 (sales and use tax imposition)
• O.C.G.A. §§ 48-8-2(17), (31), and (33)(A) (lease or rental, retail sale, and sale)
• O.C.G.A. § 48-8-3.2 and § 48-8-3.2(a)(10) (manufacturing exemption and manufacturer definition)
• Ga. Comp. R. & Regs. r. 560-12-1-.21(1) (property bought for lease or rental)
• Ga. Comp. R. & Regs. r. 560-12-2-.62 (manufacturing exemption)

Source

• Landing page: Georgia Sales & Use Tax Letter Rulings
• Original PDF: LR SUT-2018-05

Original ruling text

Georgia Letter Ruling Number: LR SUT-2018-05
Topic: Manufacturing, Leasing or Renting Equipment
Date Issued: June 13, 2018
This letter is in response to your letter ruling request dated December 2, 2016 regarding the application of Georgia
sales and use tax to certain charges made by [Redacted], (“Taxpayer”).
Facts as Presented by Taxpayer
Taxpayer provides equipment loans and leases to small businesses and middle market companies in a wide range of
industries including retail copy shops. In most instances, retail copy shops will lease copiers and printers (the
“equipment”) that will be made available to customers for self-service copying and printing. Customers using the
equipment are charged only for the copies produced, customers are not charged a lease or rental fee for the equipment
used to produce the copies. Taxpayer now inquires as to whether the equipment in the transaction described would
qualify either for tax-free treatment exemption as a purchase made for resale, or tax-exempt treatment as
manufacturing equipment under O.C.G.A. § 48-8-3.2.
Issues
1.

Can a retail copy shop purchase or lease equipment tax-free for resale when the equipment will be made available
to customers for self-service copying and printing?

2.

Does a copy shop’s purchase or lease of the equipment qualify as an exempt transaction pursuant to the
manufacturing exemptions in O.C.G.A. § 48-8-3.2?

Analysis
Georgia levies and imposes a tax (subject to certain exemptions) on the retail purchase, retail sale, rental, storage, use,
or consumption of tangible personal property and on certain enumerated services. 1
Sales for Resale
“Retail sale” means any sale, lease, or rental for any purpose other than for resale, sublease, or subrent. 2 Therefore, a
sale for resale is not a retail sale and, accordingly, not subject to sales and use tax. “Sale” means any transfer of title
or possession, exchange, barter, lease, or rental, conditional or otherwise, in any manner, or by any means of any kind
of tangible personal property for a consideration. 3 In Georgia, a lease or rental is a type of sale. 4 “Lease or rental”
means any transfer of possession or control of tangible personal property for a fixed or indeterminate term for
consideration. 5
Any person engaged in the business of leasing or renting tangible personal property to others is required to register as
a dealer and is required to collect and remit the tax on gross lease or rental charges. Tangible personal property
purchased exclusively for lease or rental to others may be purchased tax-free with a Certificate of Exemption. 6
Based on the facts presented, retail copy shops charge a per page fee for any copies made using the equipment. The
copy shops do not enter lease agreements with customers or otherwise transfer possession or control of the equipment
to customers. Copy shop customers never receive full possession, control, or use of the equipment; instead, customers
only have the limited right to use the equipment to make copies in the location and manner determined by the copy
shop that is operating the machine. A customer’s use of this equipment generally does not rise to the level of a lease
or rental because the customer does not receive full possession or control of the equipment for a fixed or indeterminate
term for consideration.

O.C.G.A. §§ 48-3-1 and 48-8-30.
O.C.G.A. § 48-8-2(31).
3
O.C.G.A. § 48-8-2(33)(A).
4
O.C.G.A. § 48-8-2(33)(A).
5
O.C.G.A. § 48-8-2(17).
6
Ga. Comp. R. & Regs. r. 560-12-1-.21(1).
1
2

Georgia Letter Ruling Number: LR SUT-2018-05
Topic: Manufacturing, Leasing or Renting Equipment
Date Issued: June 13, 2018
Page 2 of 2
Manufacturing Exemptions
Georgia law provides sales and use tax exemptions specific to the manufacturing industry. Only those entities meeting
the definition of a “manufacturer” qualify for these exemptions. 7 “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, promotional
use, or further manufacturing. To be considered a manufacturer, the person or business, or the location of a person or
business, must be:
i. Classified as a manufacturer under the 2007 North American Industrial Classification System
Sectors 21, 31, 32, or 33; or North American Industrial Classification Systems industry code 22111
or specific code 511110; or
ii. Generally regarded as 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. 8
As described above, the subject equipment is purchased or leased by copy shops that are primarily engaged in
providing photocopying and document copying services. These retail print shops do not fall within a qualifying North
American Industrial Classification System Sector or within a qualifying North American Industrial Classification
System industry code. Copy shops are typically considered business service centers and are not generally regarded as
manufacturers. 9
Rulings
1.

Tangible personal property that is purchased for lease or rental to others may be purchased tax-free for resale. In
this case, Taxpayer sells equipment to copy shops that charge customers for a limited use of the equipment. The
copy shops do not transfer possession or control of the equipment in exchange for consideration. Given these
facts, the retail copy shop is not reselling the equipment at issue and cannot purchase or lease this equipment
without payment of the tax.

2.

In order to qualify for the manufacturing equipment exemption, the purchaser or lessee of the equipment must be
a manufacturer. Based on the facts presented, the purchasers or lessees are retail copy shops that provide document
copying and business support services. These retail copy centers do not fall within a qualifying North American
Industrial Classification System Sector, do not fall within a qualifying North American Industrial Classification
System industry code, and are not generally regarded as manufacturers. Thus, copy shops, as described, are not
manufacturers, and such shops’ purchases do not fall within the manufacturing exemptions set forth in 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. The facts herein are those presented by the
taxpayer and the Department accepts them as true for this ruling. If the facts presented herein change, are not true, are
different, or material facts have been omitted, the conclusions reached in this ruling may change. In addition,
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 ruling.

O.C.G.A. § 48-8-3.2; Ga. Comp. R. & Regs. r. 560-12-2-.62.
O.C.G.A. § 48-3-3.2(a)(10); Ga. Comp. R. & Regs. r. 560-12-2-.62(2)(j).
9
See “North American Industry Classification System: 561439 Other Business Service Centers (including Copy
Shops).” U.S. Census Bureau. https://www.census.gov/cgi-bin/sssd/naics/naicsrch?code=561439&search=2017
(January 30, 2018).
7
8