If a manufacturer stores machinery and equipment in Georgia only temporarily before using it on projects outside Georgia, is that storage a taxable use in Georgia?

Plain-English summary

A manufacturer buys solar power equipment -- some from Georgia manufacturers, some from out-of-state vendors -- and stores it temporarily in a leased Georgia warehouse (a few weeks to several months) before contributing it to solar projects located entirely outside Georgia. It asked whether merely storing the equipment in Georgia counts as a taxable "use" here.

The Georgia Department of Revenue said no. Georgia's sales and use tax reaches the storage and use of tangible personal property, but O.C.G.A. § 48-8-3.2(b) exempts machinery and equipment that are "necessary and integral" to manufacturing. Critically, when equipment qualifies for that manufacturing exemption, the statute exempts the storage of it too -- and that holds even when the equipment is ultimately used outside Georgia. The Department assumed the taxpayer and its equipment met the exemption's criteria, so the temporary Georgia storage was exempt.

The Department added a second, independent reason: if the manufacturer's later contribution of the equipment to a project counts as a "sale," then its original purchases were purchases for resale (not taxable retail sales), and storing items bought for resale is not a taxable use either under O.C.G.A. § 48-8-39(a).

What this means for you

Manufacturers and out-of-state project developers

Georgia will not tax you simply for warehousing qualifying manufacturing machinery and equipment in the state on the way to a project elsewhere. The manufacturing exemption in O.C.G.A. § 48-8-3.2(b) extends to storage, so a temporary Georgia staging point does not trigger use tax on exempt equipment.

Warehousing and logistics planners

Georgia can be used as a staging/warehousing location for qualifying manufacturing equipment without incurring Georgia use tax on the storage. Whether the exemption applies still depends on the equipment meeting the "necessary and integral to manufacturing" criteria -- confirm that before relying on the storage exemption.

Accountants and tax professionals

Two independent paths reached the same non-taxable result: (1) the § 48-8-3.2(b) manufacturing exemption expressly covers storage of qualifying machinery, and (2) items held for resale are not put to a taxable use under § 48-8-39(a). Note the Department did not independently verify the equipment qualifies -- it "assume[d]" the criteria were met based on the taxpayer's representations, so the exemption's fact-specific tests still control.

Common questions

Q: Does storing manufacturing equipment in Georgia create a taxable use?
A: Not if the equipment qualifies for Georgia's manufacturing exemption. That exemption covers the storage of qualifying machinery and equipment, even when the equipment is ultimately used outside Georgia.

Q: Does it matter that the equipment is used on out-of-state projects?
A: No. The ruling states the storage is exempt "even if the machinery and equipment are ultimately used outside Georgia," as long as the underlying purchase qualifies for the manufacturing exemption.

Q: What if the equipment is later contributed to the project rather than used by the buyer?
A: If that contribution is a "sale," the original purchase is a purchase for resale -- not a taxable retail sale -- and storing resale items is not a taxable use under O.C.G.A. § 48-8-39(a).

Q: Can I rely on this ruling for my own manufacturing purchases?
A: Not automatically. A Georgia letter ruling binds the Department only for the taxpayer and facts it was issued to, and no other taxpayer may rely on it. Whether your specific equipment is "necessary and integral to manufacturing" is a fact-specific question.

Citations and references

Statutes:

• O.C.G.A. § 48-8-3.2(b) (exemption for machinery/equipment necessary and integral to manufacturing; industrial materials and packaging supplies)
• O.C.G.A. §§ 48-8-1, 48-8-2(31), 48-8-30(a) (imposition of sales/use tax; definition of "retail sale")
• O.C.G.A. § 48-8-39(a) (storage/retention of items purchased for resale is not a taxable use)

Source

• Landing page: Georgia Sales & Use Tax Letter Rulings
• Original PDF: LR SUT-2020-04

Original ruling text

Georgia Letter Ruling: LR SUT-2020-04
Topic: Manufacturing Exemptions
Date Issued: April 15, 2020
This letter is in response to your request for guidance on the application of Georgia sales and use tax to certain
purchases and uses of equipment by Taxpayer.
Facts Presented by Taxpayer
Taxpayer is a manufacturer that purchases solar power equipment for certain out of state (i.e., outside of Georgia)
solar projects it is contemplating. Taxpayer purchases some of the equipment from manufacturers in Georgia and
other equipment from vendors outside of Georgia, which Taxpayer then transports temporarily into Georgia. All of
the equipment is to be stored temporarily in Georgia in a Taxpayer leased warehouse until the projects begin. The
equipment will be temporarily stored in Georgia for as little as a few weeks or as long as several months. When the
projects are to begin, Taxpayer will contribute the equipment to the project rather than sell the equipment and will
retain partial ownership over the overall project. None of the projects being contemplated are located in Georgia,
therefore none of the equipment will ultimately be used in Georgia.
Issue
Is storage in Georgia of the equipment referenced above a taxable use in Georgia?
Analysis
Georgia levies and imposes sales and use 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 A “retail
sale” is any sale, lease, or rental for any purpose other than for resale, sublease, or subrent. 2 Thus, purchases for
resale are not subject to sales and use tax as such purchases are not “retail sales”. 3
O.C.G.A. section 48-8-3.2(b) provides the following sales and use tax exemption for certain machinery and
equipment:
The sale, use, or storage of machinery or equipment which is necessary and integral to the
manufacture of tangible personal property and the sale, use, storage, or consumption of industrial
materials or packaging supplies shall be exempt from all sales and use taxation. (emphasis added).
To qualify for this exemption, the purchaser must meet certain criteria, and the items purchased must meet certain
criteria. For purposes of this ruling, the Department assumes Taxpayer and the equipment at issue meet these
criteria. If the machinery and equipment purchases qualify for the underlying exemption, the statute quoted above
provides that the storage of the machinery and equipment is also exempt from taxation (even if the machinery and
equipment are ultimately used outside Georgia).
Ruling
Taxpayer represents that it is making purchases that qualify for the exemption contained in O.C.G.A. §48-8-3.2(b).
As such, the storage of such items in Georgia is also exempt from sales and use tax. 4

O.C.G.A. §§ 48-8-1, 48-8-2(31), and 48-8-30(a).
O.C.G.A. § 48-8-2(31).
3
In addition to purchases for resale not being subject to the tax, retention (i.e., storage) of items purchased for resale
is also not subject to the tax. O.C.G.A. §48-8-39(a).
4
Furthermore, if Taxpayer’s contribution of the subject machinery and equipment to the project is a “sale”,
Taxpayer’s initial purchases of the machinery and equipment are for resale and thus not subject to sales and use tax,
and Taxpayer’s subsequent retention/storage of the items purchased for resale is not subject to tax pursuant to
O.C.G.A. §48-8-39(a).
1
2

Georgia Letter Ruling: LR SUT-2020-04
Topic: Manufacturing Exemptions
Date Issued: April 15, 2020
Page 2 of 2
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.