Are internet-delivered prewritten-software sales exempt from Georgia sales tax, and must the seller still register and file returns?

Plain-English summary

An out-of-state software company sold prewritten software, sometimes customized it, and always installed it remotely over the internet. It did not sell hardware or provide software on any disk, drive, or other tangible storage medium. Its invoices, however, did not state the delivery method.

The Georgia Department of Revenue ruled that the sales were exempt because Georgia exempted prewritten software delivered electronically or by load and leave. Internet-only delivery met that rule. Customization did not change the stated result for the prewritten software sales described.

Documentation was essential. If the invoice, contract, or other records did not show electronic delivery, Georgia would presume delivery on a tangible medium and make the seller prove otherwise. The company also had to register for a Georgia sales-tax number and file returns even when no tax was due or no sales occurred.

What this means for you

Software companies

Put the delivery method on invoices, contracts, or other retained records. An internet-download exemption can be lost in an audit if the seller cannot establish that no tangible medium was transferred.

Out-of-state sellers

Exempt sales do not necessarily eliminate registration and filing duties. The Department assumed this company was a dealer because it already had an active withholding account and told it to register and file zero-due returns when required.

Accountants and tax professionals

Separate taxability from compliance. The transaction may be exempt under O.C.G.A. § 48-8-3(91), while the seller still needs a certificate of registration and periodic returns under the dealer-registration rules.

Common questions

Q: Is prewritten software taxable in Georgia?
A: It is generally tangible personal property, but the ruling applies the exemption for software delivered electronically without a tangible storage medium.

Q: Does remote installation over the internet qualify?
A: Yes on these facts. The company always installed the software over the internet and provided no tangible medium.

Q: What if the invoice does not say how the software was delivered?
A: Georgia presumes tangible delivery, and the seller bears the burden of proving electronic delivery to the Department's satisfaction.

Q: Must a seller register if all Georgia sales are exempt?
A: Yes under the ruling's registration analysis. Dealers conducting business in Georgia must register, and returns must be filed even when no tax is due or no sales were made.

Q: Can another software seller rely on this ruling?
A: No. It is limited to the requesting taxpayer and facts, including internet-only delivery and no hardware or tangible software medium.

Citations and references

Statutes and rule:

• O.C.G.A. §§ 48-8-1 and 48-8-30(a) (sales and use tax imposition)
• O.C.G.A. §§ 48-8-2(31) and (37) (retail sale and tangible personal property)
• O.C.G.A. § 48-8-3(91) (electronically delivered prewritten-software exemption)
• O.C.G.A. § 48-8-38 (presumption of taxability and seller's burden)
• O.C.G.A. § 48-8-59 (dealer registration)
• Ga. Comp. R. & Regs. r. 560-12-2-.111(2)(f) and (4)(a) (electronic delivery and documentation)

Source

• Landing page: Georgia Sales & Use Tax Letter Rulings
• Original PDF: LR SUT-2018-10

Original ruling text

Georgia Letter Ruling Number: LR SUT-2018-10
Topic: Software
Dated: August 7, 2018
This letter is in response to your request for guidance on the application of Georgia sales and use tax to sales of
software installed using the internet.
Facts Presented by Taxpayer
[Redacted], (“Taxpayer”) is a computer software company. Taxpayer is registered and operating from the State of
[Redacted]. Taxpayer sells prewritten software, which Taxpayer can customize upon a customer’s request. Taxpayer
always remotely installs the software on a customer’s computer using the internet. Taxpayer does not sell hardware,
nor does Taxpayer make any software available on a tangible storage medium. Taxpayer does not indicate the method
of software delivery on its invoice to the customer.
Issues
1.

Are Taxpayer’s computer software sales exempt from Georgia sales and use tax?

2.

If Taxpayer’s only Georgia sales are exempt from the tax, is Taxpayer required to register to remit sales and use
tax in Georgia?

Analysis
Imposition of Tax
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, certain enumerated services, and utilities. 1 “Retail sale” means any
sale, lease, or rental for any purpose other than for resale, sublease, or subrent. 2 “Tangible personal property” means
personal property that can be seen, weighed, measured, felt, or touched or that is in any other manner perceptible to
the senses. Tangible personal property includes prewritten computer software. 3
Tax Exemption
Exemptions from taxation are strictly construed, and an exemption will not be granted unless the relevant statute
clearly and distinctly shows that such was the plain and unambiguous intention of the General Assembly. 4 Georgia
law provides that sales and use tax does not apply to the sale of prewritten software which has been delivered to the
purchaser electronically or by means of load and leave. 5 “Delivered electronically” means delivered to the purchaser
by means other than tangible storage media. 6 Since Taxpayer sells software that is only delivered using the internet,
Taxpayer’s software sales fall squarely within the subject tax exemption.
Nonetheless, all gross sales of a retailer are subject to sales and use tax until the contrary is established, and the retailer
bears the burden of proving that a sale of tangible personal property is not a taxable sale. 7 If the method of delivery is
not indicated on the Taxpayer’s invoice, purchase contract, or other documentation, delivery will be presumed to have
been made through a tangible medium, and the burden will be upon Taxpayer to establish to the satisfaction of the
Department that the computer software was delivered electronically. 8
O.C.G.A. §§ 48-8-1, 48-8-2(31)(A), and 48-8-30(a).
O.C.G.A. § 48-8-2(31).
3
O.C.G.A. § 48-8-2(37).
4
Ga. Comp. R. & Regs. r. 560-12-1-.18.
5
O.C.G.A. § 48-8-3(91).
6
Ga. Comp. R. & Regs. 560-12-2-.111(2)(f).
7
O.C.G.A. § 48-8-38.
8
Ga. Comp. R. & Regs. 560-12-2-.111(4)(a).
1
2

Georgia Letter Ruling Number: LR SUT-2018-10
Topic: Software
Dated: August 7, 2018
Page 2 of 2
Dealer Registration
Any individual or entity desiring to engage in or conduct business as a seller or dealer in this state is required to
register for a sales and use tax number regardless of whether all sales will be online, out of state, wholesale, or exempt
from tax. 9
Rulings
1.

The retail sale (including the sale, lease, rental, license, or use) of prewritten computer software is generally
subject to Georgia sales and use tax. The tax does not apply to the sale of prewritten software which is delivered
to the purchaser electronically. Because Taxpayer only delivers software using the internet (i.e., electronically),
Taxpayer’s sales of software are tax exempt. To show that a sale is tax exempt, Taxpayer’s invoice, purchase
contract, or other documentation must indicate the method of delivery.

2.

All dealers conducting business in Georgia are required to register for a sales and use tax number. The Department
does not generally issue letter rulings determining whether a taxpayer is a dealer; however, because Taxpayer has
an active withholding account, the Department assumes Taxpayer satisfies the definition of Dealer. Consequently,
Taxpayer should apply through the Georgia Tax Center (https://gtc.dor.ga.gov) for a sales tax certificate of
registration. A sales tax return must be filed even when no tax is due or no sales were made.

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.

9

O.C.G.A. § 48-8-59.