When a lease invoice shows one payment, are installation, financing, freight, document, and collection charges included in Georgia's sales-tax base?

Plain-English summary

The lessors billed one lease-payment amount while keeping an internal breakdown for freight, installation, document fees, late fees, insurance, and collection costs. The Department ruled that the whole invoice was generally taxable. Delivery and services necessary to complete the lease stay taxable regardless of itemization. Installation and financing-related charges can be excluded only when separately stated to the customer.

Common questions

Q: Do the lessor's internal records establish a nontaxable installation amount?

A: No. The charge must be separately stated on customer-facing documentation.

Q: Does separately stating freight remove it from sales price?

A: No. Delivery charges remain included by statute.

Citations and references

• O.C.G.A. § 48-8-2(10), (31), and (34) -- delivery, retail sale, and sales price
• O.C.G.A. § 48-8-30(a) -- sales and use tax

Source

• Landing page: Georgia Sales & Use Tax Letter Rulings
• Original PDF: LR SUT-2016-17

Original ruling text

Date Issued: August 8, 2016
Georgia Letter Ruling: LR SUT-2016-17
Topic: Leases
This letter is in response to your request for guidance on the application of Georgia sales and use tax to calculating
sales price.
Facts Presented by Taxpayer 1
Taxpayer is a third party servicing company. Taxpayer’s clients are in business as lessors of tangible personal property.
Taxpayer collects lease payments from lessees and remits sales tax on behalf of Taxpayer’s clients, the lessors.
Taxpayer’s clients use lease agreements in which the lessee pays a term of payments and has the option to purchase
the property at the end of the lease. Each term of payments is stated in the agreement and invoiced as a single amount,
not broken down by underlying charges. Underlying costs include charges for freight, installation, document fees, late
fees, insurance, and collection costs. Although the lessee is provided only a non-itemized lease price, Taxpayer and
lessor keep records that reflect a breakdown of charges.
Issue
When a lease payment is invoiced as a non-itemized payment amount, is the applicable sales and use tax calculated
on the entire lease payment or just a portion of the payment?
Analysis
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 and on certain services. 2 A “retail sale” is any sale, lease, or rental
for any purpose other than for resale, sublease, or subrent. 3
Georgia imposes sales tax on the sales price of tangible personal property. “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 following:
(i)
(ii)
(iii)
(iv)

The seller’s cost of the property sold;
The cost of materials used, labor, or service cost, interest, losses, all costs of transportation
to the seller, all taxes imposed on the seller, and any other expense of the seller;
Charges by the seller for any services necessary to complete the sale; and
Delivery charges. 4

“Sales price” does not include the following:
(i)
(ii)
(iii)

Discounts, including cash, term, or coupons that are not reimbursed by a third party that are allowed
by a seller and taken by a purchaser on a sale;
Interest, financing, and carrying charges from credit extended on the sale of personal property or
services, if the amount is separately stated on the invoice, bill of sale, or similar document given to
the purchaser;
Any taxes legally imposed directly on the consumer that are separately stated on the invoice, bill of
sale, or similar document given to the purchaser;

Facts were presented by Taxpayer in its letter ruling request and in a telephone call on August 1, 2016.
O.C.G.A. §§ 48-8-1 and 48-8-30(a).
3
O.C.G.A. § 48-8-2(31).
4
O.C.G.A. § 48-8-2(34). “Delivery charges” are charges by the seller of personal property or services for preparation
and delivery to a location designated by the purchaser of personal property or services including, but not limited to,
transportation, shipping, postage, handling, crating, and packing. O.C.G.A. § 48-8-2(10).
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Date Issued: August 8, 2016
Georgia Letter Ruling: LR SUT-2016-17
Topic: Leases
Page 2 of 2
(iv)
(v)
(vi)

Installation charges if they are separately stated on the invoice, billing, or similar document given to
the purchaser;
Telecommunications nonrecurring charges if they are separately stated on the invoice, billing, or
similar document; and
Credit for any trade-in. 5

Regardless of itemization, charges for delivery, commonly referred to as freight, are included in the sales price.
Additionally, document fees, collection fees, and like charges are included in the sales price if they are for services
necessary to complete the sale. In other words, any charges that a customer must pay to obtain the particular item
purchased are subject to tax. In determining which services are necessary to complete a sale, the Department
commonly considers multiple factors, including the following:
(i)
(ii)
(iii)
(iv)

The extent of the relationship between the product and service;
Whether a customer can purchase the service without the product;
Whether a customer can purchase the product without the service; and
Any difference in the cost of the service or the cost of the product when the service and product are
purchased separately as opposed to together.

Typically, document fees and collection fees are not optional charges that a lessee could avoid, but rather these charges
are merely a component of the lessor’s cost of selling the property. If a lessee is not able to lease the tangible personal
property as anticipated without paying such a fee, the fee would be considered to be included in the taxable sales
price. 6
Pursuant to the definition of “sales price,” installation and carrying charges are not included in the taxable sales price
only if the itemized cost is documented for the customer. In this case, because the lessees are not given an agreement,
invoice, or other documentation that separately states such charges, those charges are included in the taxable sale
price.
Ruling
As a general rule, when a lease payment is invoiced as one non-itemized amount, the entire invoiced amount is subject
to tax. Furthermore, delivery charges and charges for services necessary to complete a sale (i.e., unavoidable charges
and charges for services that are essentially components of the sale) are included in the taxable sales price, regardless
of whether such charges are itemized.
Charges for installation and financing are excluded from the taxable sales price only if they are itemized for the
customer. In the present case, such charges are included in the taxable sales price because lessees are provided a nonitemized payment amount. If a lessee received an invoice or other documentation that separately stated installation
and carrying costs, such charges would be excluded from the sales price.
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.

O.C.G.A. § 48-8-2(34).
Conversely, if the price were attributable to products that are taxable and independent services (such as optional
insurance) that are nontaxable, the portion of the non-itemized price attributable to the nontaxable services is not
subject to tax if the provider can identify by reasonable and verifiable standards such portion from its books and
records that are kept in the regular course of business. See O.C.G.A. § 48-8-2(31)(G).
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