Georgia and Arkansas Issue Opposite Sales Tax Rulings for Owner of Electric Car Charging Stations

A taxpayer received opposite rulings from Georgia and Arkansas regarding the applicability of sales tax on charges to customers that use the taxpayer’s electric car charging stations even though both states tax the sale of electricity.

By: Jeff Glickman, SALT Partner

One of the biggest challenges for state tax advisors regarding sales tax is the difficulty of finding guidance that addresses the particular facts of a transaction. This is the result of two factors: (1) the way in which goods and services are provided constantly changes and (2) state tax laws and regulations are frequently amended. Thus, while existing administrative guidance may be partially analogous to the specific facts, any variations in the current situation, or the applicable rules, leave open the possibility that states can reach different results.

The above is why obtaining a ruling from a state may be a taxpayer’s best course of action. Sometimes overlooked due to the increased time, effort, and costs associated with the request, private rulings are beneficial in that they provide a taxpayer certainty regarding the tax implications of a transaction. For practitioners, when more rulings exist there is a greater understanding of how a state interprets and applies its rules. This is especially true when two states reach opposite conclusions from the same set of facts and rules, as was the case regarding a Georgia letter ruling[1] and Arkansas legal opinion.[2]

The Taxpayer owns and operates electric vehicle charging stations where customers pay for charging time, a $1.00 session fee, and for any idling time (when a car is left connected to the charger more than 10-minutes after the car is fully charged). The service is not sold by kilowatt/hour (kWh), but subject to future regulatory approval the Taxpayer will have the option to charge by kWh. Finally, the Taxpayer pays sales tax on its purchase of electricity from the utility company (no resale certificate is currently being provided). The Taxpayer requested guidance on the sales tax treatment of its current charges as well as if that treatment would change if it started charging by kWh.

In Georgia, the sale of electricity is subject to sales tax since electricity is included in the definition of “tangible personal property.”[3]  Georgia’s definition of “sales price” includes charges “for any services necessary to complete the sale.”[4] Nonetheless, the state concluded that the Taxpayer was not selling electricity since it’s not regulated as a utility by the Georgia Public Service Commission.[5]  Therefore, the Taxpayer’s charges for “charging time” are not taxable.

The ruling then notes that if the Taxpayer obtained regulatory approval to charge by kWh, then the Taxpayer would be selling electricity and would be required to collect sales tax from its customers, including any charges for services that are necessary to complete the sale (presumably this would include the session fee and any charges for idling time). In this case, the taxpayer would be able to purchase electricity without sales tax by providing the electric company with a resale certificate.

Like Georgia, Arkansas treats electricity as tangible personal property subject to sales tax, and it includes in the “sales price” a charge “for any service necessary to complete the sale.”[6] Unlike Georgia, the state concluded that, regardless of any regulatory approval, the Taxpayer is selling electricity and is required to collect sales tax, specifically noting that there “is no mechanism under the law by which a seller may be granted an exemption from collecting sales tax on the retail sale merely because the retailer has chosen to forego the available wholesale tax exemption on purchases for resale.” Additionally, session and idling fees would also be taxable if required as part of the sale of electricity.

With regard to the sales tax consequences if the charges were by kWh, the opinion declined to officially rule on the hypothetical, but did note that “[g]enerally speaking, the method of billing would not create a distinction that would affect the taxability of the transactions. Whether, or not, the taxpayer utilizes the sale-for-resale exemption, the analysis would be the same for selling electricity by kWh as sales of electricity based on the amount of time a customer is plugged in to the charging station.”

Without these rulings, the taxpayer may have interpreted each state’s rules differently, resulting in future sales tax exposure. State rulings provide specific, reliable and valuable guidance to a taxpayer. Aprio’s SALT team has experience preparing letter ruling and working with state revenue departments to help achieve a clear and fair result. We constantly monitor these and other important state tax topics, and we will include any significant developments in future issues of the Aprio SALT Newsletter.

Contact Jeff Glickman, partner-in-charge of Aprio’s SALT practice, at jeff.glickman@aprio.com for more information.

This article was featured in the July 2020 SALT Newsletter.

[1] Georgia Letter Ruling: LR SUT-2019-07 (September 25, 2019).  Even though this ruling was issued in September  2019, it was not published on the state’s website until recently.

[2] Arkansas Revenue Legal Counsel Opinion No. 20190622 (May 19, 2020).

[3] O.C.G.A. § 48-8-2(31)(A), (37).

[4] O.C.G.A. § 48-8-2(34)(A)(iii).

[5] Georgia took a similar position in a 2014 letter ruling.

[6] Ark. Code Ann. § 26-52-103(30)(B), (19)(A).