Georgia Will Now Impose Sales Tax on Digital Items
Beginning January 1, 2024, Georgia will join over half of the U.S. states in taxing some or all digital items. Technology companies with customers in Georgia should understand the applicable terminology describing these items for sales and use tax purposes in preparation to revise the tax treatment of products if needed. The new law will impose sales and use tax on the following items:
- “Specified digital products”
- “Other digital goods”
- “Digital codes”
Unlike other states’ sales and use tax laws (e.g., New York and Texas), this law does not include the taxation of subscription information services or data processing, or any digital good where access is contingent upon the continued payment for access.
Exactly what digital items will be taxed?
Our understanding is that digital goods with permanent rights of use will be subjected to sales tax.
Specified Digital Products
Georgia does not specifically define the broad term “digital products.” However, it lists as examples:
- digital audio-visual works
- digital audio works
- digital books
There is a definition included in the law of “digital audio-visual works” that Georgia provides, which is “any series of related images, together with accompanying sounds, if any and which, when shown in succession, impart an impression of motion.”
Other Digital Goods
Georgia defines “other digital goods” to mean artwork, photographs, periodicals, newspapers, magazines, video or audio greeting cards, and video games or electronic entertainment.
Digital Code
Georgia will tax “digital code,” which it defines as a key, activation or enabling code that conveys a right to obtain one or more specified digital goods or other digital goods.
Digital code as defined under Georgia law does not include “a code that represents a stored monetary value that is deducted from a total as it is used by the purchaser or a redeemable card, gift card, or gift certificate that entitles the holder to select specified digital goods or other digital goods of an indicated cash value.”
We understand the taxability will include digital books with permanent rights of use, digital magazines, electronic textbooks with permanent rights of use, electronic newspapers and electronically delivered photographs or artwork.
What digital items will not be taxed?
The state does not appear to include electronically downloaded software, subscription information services, data processing with electronic output or digital audio works with less than a permanent right of use or an obligation to make payments to continue access.
Therefore, online subscription research services and streaming services like Spotify and Netflix are not covered under the definition of what will now be taxable.
What action should my organization take?
Companies that sell or purchase electronic goods or services and that have nexus for sales tax in Georgia should compare their product offerings against the definitions to determine if a change in taxability should be made. Companies operating in Georgia should also make sure they include these items in any Use Tax filing starting in 2024.
If you would like more information about this change in Georgia law, please contact your Warren Averett advisor directly, or ask one of our state and local tax advisors to reach out to you.