Does Georgia tax a custom closet system and the separately stated charge to install it?

Plain-English summary

The Department treated the custom closet system as movable furniture rather than a real-property fixture. It rested on the floor, and the few screws or finishing nails used for safety could be removed without damaging the furniture and with only negligible wall damage. The retailer therefore was selling tangible personal property and could purchase the system for resale.

Sales tax applied to the product's sales price. The installation charge was not taxable because it was separately stated on the customer's invoice. The retailer nevertheless owed sales or use tax on tangible personal property it consumed while performing the installation.

Common questions

Q: Did attaching the closet system to a wall make it a fixture?

A: No. The ruling emphasized that the system was not intended to remain permanently and could be removed without damage to the furniture and with negligible damage to the wall.

Q: When was the installation charge excluded from the taxable price?

A: When the retailer stated the installation charge separately on the customer invoice.

Citations and references

• O.C.G.A. § 48-8-2(34)(B)(iv) -- separately stated installation charges
• O.C.G.A. § 48-8-63(b) -- tax on property used to perform installation services
• O.C.G.A. § 44-1-6(a) -- fixture principles
• Macon Machine Shop, Inc. v. Hawes, 118 Ga. App. 280 (1968) -- contractors as consumers

Source

• Landing page: Georgia Sales & Use Tax Letter Rulings
• Original PDF: LR SUT-2016-11

Original ruling text

Date Issued: April 15, 2016
Georgia Letter Ruling: LR SIT-2016-11
Topic: Retail Sales
This letter is in response to your request for guidance on the application of Georgia sales and use tax to [Redacted]
(“Taxpayer”) sale and installation of closet organization products.
Facts Presented by Taxpayer
“Taxpayer” is a retailer introducing a product (“Product”) to help organize closets of its customers (“Customer”).
Product is a floor-based system resting on the floor of a customer’s home but not connected or attached in any manner
to the floor. It can be placed against walls or remain freestanding in the center of a closet. Product can be enhanced
to include drawers, hanging rods, retractable dressing mirrors, tie and belt racks, jewelry trays, hampers, and other
organizational amenities that the customer desires.
Product is designed to customer’s specifications using actual closet measurements from customer. Depending on
customer’s preference, Product can be placed freestanding in the center of a room, located against a single wall, or
configured against multiple walls to give the appearance of wall-to-wall, built-in cabinetry.
Product is assembled onsite at customer’s location by subcontractors working on behalf of Taxpayer. After assembly,
Product is placed freestanding in the center of a room or against a wall according to design specifications. Wall-towall appearance is achieved by placing Product components adjacent to each other against each wall of the room.
Decorative trim may be added across Product components to further have the appearance of built-in cabinetry.
When Product is placed against walls, it utilizes anti-tip brackets (resembling an L-bracket) to prevent damage and
injury from tipping. The anti-tip bracket connects Product to the wall with two screws and generally consists of one
anti-tip bracket per wall. Freestanding Product requires no anti-tip brackets connected to walls or additional safety
features.
Product placed against a wall can be augmented with rear paneling of the same color and material as Product to give
the appearance of an enclosed cabinet. If rear paneling is not chosen by customer, the wall against which Product is
placed is visible between shelves.
Rear paneling is placed similar to Product in that it rests on the floor against the wall. Rather than an anti-tip bracket,
it is secured using either two or four finishing nails, either one in each top corner or one in each of the four corners to
prevent shifting and tipping. After the paneling is placed against the wall, Product is placed on the floor adjacent to
the paneling to give the appearance of a complete cabinet. Product’s anti-tip bracket is secured after placement against
the rear panel.
Issue
What is the proper application of sales and use tax to Taxpayer’s sale and installation of Product in existing and newly
constructed structures?
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 “Where raw materials are fabricated
by a contractor into products to be installed and incorporated into realty, this constitutes a use or consumption by the
contractor . . . . Sales to contractors are sales to consumers.”2 Thus, if Taxpayer’s Product is incorporated into real
property when installed, then Taxpayer is the end-user of Product and owes sales or use tax on it.

1
2

O.C.G.A. §§ 48-8-1, 48-8-30(a).
Macon Machine Shop, Inc. v. Hawes, 118 Ga. App. 280, 281-282 (1968) (punctuation and citation omitted).

Date Issued: April 15, 2016
Georgia Letter Ruling: LR SIT-2016-11
Topic: Retail Sales
Page 2 of 2

Under Georgia law, anything that is intended to remain permanently in its place even if it is not actually attached to
the land is a fixture which constitutes a part of the realty and passes with it. 3 The determination of whether a particular
article is a fixture generally requires a three-part inquiry: (a) can the article be removed without essential injury to the
freehold or the article itself; (b) what is the intention of the parties with respect to the article’s status; and (c) was there
unity of title between the article and the realty at the time the article allegedly became a fixture. 4
Taxpayer’s Product is furniture and furniture accessories that are not intended to remain permanently in place. For
safety purposes, the furniture can be attached to the wall using two easily removable screws, and the optional paneling
can be secured with two to four finishing nails. The screws and nails can be removed with no damage to the furniture
and negligible damage to the walls. The impermanent placement of Product indicates that it is not incorporated into
real property. Taxpayer is, therefore, not a contractor, the end-user of Product. Instead, Taxpayer is merely a seller of
tangible personal property and it may properly purchase such property for resale without the payment of tax.
In selling the Product, Taxpayer charges for the Product itself and installation. The taxable “[s]ales price shall not
include . . . [i]nstallation charges if they are separately stated on the invoice, billing, or similar document given to the
purchaser . . . .”5 Because Taxpayer separately states installation charges on customer invoices, sales tax applies to the
sales price of Product, exclusive of installation charges. In addition to remitting tax collected from its customer on
Product sales price, Taxpayer must pay sales or use tax on all tangible personal property used to perform the
installation service.6
Ruling
Taxpayer is engaged in the sale and installation of tangible personal property, rather than the installation of real
property fixtures. Taxpayer is, therefore, not the end-user of Product and may properly purchase Product for resale.
The sales price of Product, exclusive of installation charges, is subject to tax. Because Taxpayer separately states
installation charges on customer invoices, those charges are not subject to sales tax. Additionally, Taxpayer owes sales
or use tax on all tangible personal property used in the performance of the installation service.
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, this ruling may become invalid. Subsequent statutory
or administrative rule changes or judicial interpretations of the statutes or rules upon which this ruling is based may
subject similar future transactions to different tax treatment than that expressed in this ruling.

3

Homac, Inc. v. Ft. Wayne Mortg. Co., 577 F. Supp. 1065, 1069 (N.D. Ga. 1983) (citing O.C.G.A. §44-1-6(a)).
Id. at 1069-1070.
5
O.C.G.A. § 48-8-2(34)(B)(iv).
6
O.C.G.A. § 48-8-63(b).
4