New Sales Tax Rates Effective July 1, 1997

by Robert Wagner, CPA

Just when you thought you could relax, along comes more sales tax complexity and a radical revision of the Georgia sales tax form. The new format goes into effect on July 1, 1997 - the same date that sales tax rates increase in 60 Georgia counties. For example, in Dekalb County, on July 1 sales tax will go from 5% to 7% as a result of two voter referenda approved last fall. Net result -- sales tax in Dekalb County jumps by a whopping 40%!

What Happened?

For years a battle has been raging between taxpayers angry over higher property tax bills and elected officials looking for new sources of revenue. Faced with the choice of higher property vs. higher sales taxes, voters last fall chose what many see as the lesser of two evils - higher sales taxes.

For example, in Dekalb County voters approved two new sales taxes --

• HOST ( homestead option sales tax) - a 1% tax which promises to roll back property tax for every dollar of new sales tax collected and
• Education tax - a 1% tax which will fund education improvements.

In metro Atlanta the sales tax rates beginning July 1 are: Fulton - 7%, Gwinnett - 6%, Clayton - 6%. Cobb County remains unchanged at 5%.

Point of Sale Alert!!

Restaurateurs and hoteliers must adjust their point of sale systems to collect the appropriate tax rates beginning July 1. There is an incentive to meet this deadline. OPERATORS ARE LIABLE FOR THE HIGHER TAX EVEN IF THEY DO NOT COLLECT IT! Since adjusting your POS system may require computer programming and testing, time is running out for the change-over.

With the HOST and education sales tax options, the number of local tax options is out of control. There are now six different county-based local sales tax options in Georgia -- MARTA, local option, Towns Co. 2nd, special purpose, educational, and homestead. With 159 counties in Georgia, operators selling in multiple counties have a real challenge just keeping up with changing tax rates - and modifying their accounting systems accordingly. The only good news is that, by law, county tax rates are limited to a maximum of 7%.

New Sales Tax Form Arrives

With so many local sales taxes to track, the old sales tax form is clearly outmoded and irrelevant. The Department of Revenue (DOR) has developed new sales tax Form ST-3. The objective of ST-3 is to make a difficult job somewhat less taxing by eliminating the repetitiveness of the old form and moving to a single line concept for taxable sales. The taxpayer arrives at taxable sales for each of the local tax categories and multiplies sales by the relevant tax rates. The amount of tax by category is totaled to arrive at total sales tax due and a check is sent for that amount along with form ST-3.

As in the past, completion of the form is simple -- the real work is done by the taxpayer in order to arrive at taxable sales. POS systems must be updated and maintained, sales must be tracked by county and by local tax category, and electronic spreadsheets must be maintained to support the amounts reflected on form ST-3. These procedures are not taxpayer friendly and will serve only to complicate business operations. As we know, ultimately it’s the consumer that pays in the form of higher prices for this administrative nightmare.

Operators will notice another change in new form ST-3. It is computer readable. DOR plans to soon begin computer scanning sales tax forms in an effort to reduce costs and increase efficiency. In short, they want to enter the 90’s - technologically at least - before they’re over.

Sales Tax Traps

There are a couple of sales tax traps that operators should be aware of:

1. All operators with monthly sales tax payments of $20,000 or more ARE REQUIRED TO PAY SALES TAX ELECTRONICALLY. The threshold will soon drop to $10,000 per month. Expect more taxpayers to get caught in this electronic filing web since sales tax receipts are going up dramatically due to increased rates.
2. Operators with four or more locations MUST file tax under a single “master number”. Sales tax in this case is filed on a consolidated form. While this rule has been in effect for some time, many operators are not aware of it.

For More Information

Look for upcoming seminars sponsored by the GHTA and others discussing new sales tax compliance. To have the forms automatically faxed to you, call the state’s fax-back number at 404-656-4293. DOR’s address on the Internet is: http://www.state.ga.us/Departments/DOR.

Robert Wagner is a principal in Robert Wagner & Company, LLC, CPAs. The firm provides tax and accounting services to restaurants, bars and hotels. He can be reached at 404-874-7000, fax 404-874-1132, email: rwagner@bellsouth.net.