The Georgia Department of Revenue recently finalized a sales tax regulation that could result in prospective sales tax savings as well as a refund opportunity for Georgia restaurants and other establishments that sell prepared food (e.g., caterers, food trucks, cafeterias).

Specifically, sales tax is no longer required to be paid on purchases of any of the following items:

1. Disposable food packaging.
   a. Disposable food packaging used to contain food that is transferred to the customer such as to-go boxes, cups, lids, and other similar items. 
   
   
2. Items for (re)sale.
   a. Food and other items of tangible personal property, such as a toy sold as a component part of a meal, that are purchased for resale. 
   
   
3. Single-use items provided with meals sold.
   a. Single-use items provided or made available to the customer without charge which are a component part of a meal sold to the customer including straws, stirrers, napkins, (disposable) utensils, toothpicks, chopsticks, and pre-moistened disposable cloths. 
   
   
4. Food items provided with meals sold. 
   a. Condiments and other food items that are provided to the customer without a separate charge as a component part of a meal. Examples include ketchup bottles, peanuts, chips and salsa, mustard packets, and other similar items. 

When the Department of Revenue finalizes a tax regulation, it sometimes takes the stance that the regulation is a “change of position” such that taxpayers may only apply the new regulation on a prospective basis. However, in speaking with a tax policy person within the Department, it appears that the Department is viewing this new regulation as a “clarification” meaning that, in addition to applying on a prospective basis, taxpayers may request a refund of tax paid for purchases of any of the above items.

Georgia law generally allows taxpayers three years from the date of payment of the tax to amend sales tax filings in order to claim a refund of taxes previously paid (i.e., back to 2011).

Affected establishments should also be aware that the new regulation clarifies instances where sales tax must be paid. Establishments that have previously not paid taxes on any of the below items must begin doing so and face potential exposure of prior unpaid taxes:

1. Items used by restaurant.
   a. Complimentary meals furnished to employees or customers; tables, chairs, linens, silverware, glassware; ice; and single-use items that are not a component part of a meal sold to a customer such as paper towels, plastic wrap, and paper menus. 
   
   
2. Gratuity, when: 
   a. negotiated between the seller and the customer in advance of a meal; 
   b. unilaterally added to the bill by the seller; or 
   c. Mandatorily added to the bill pursuant to a statement that certain tips are mandatory (e.g., for large parties).
   
   
3. Service charges.
   a. Delivery charges, even if separately stated, and other service charges that are “necessary to complete the sale,” such as a fuel surcharge when delivering food.

For a copy of the new regulation, see https://etax.dor.ga.gov/salestax/new_regs/560-12-2-115_Restaurants-final.pdf.

For more information on the new regulation, please contact Stephen Bradshaw at [email protected] or at 678-302-1479.