Georgia and South Carolina Provide Guidance Regarding Sales Tax on “Fees”

December 15, 2022

By: Betsy Goldstein, SALT Manager

At a glance

  • The main takeaway: As businesses combat increasing costs by charging additional fees instead of raising prices on their products and services, it’s important to consider whether these fees are included in the sales tax base.
  • Assess the impact: Failure to properly address the taxability of these fees could result in the seller under-collecting on sales tax and having to make up the difference (plus penalties) out-of-pocket.
  • Take the next step: Aprio’s State and Local Tax (SALT) team can assist your business to ensure that you are collecting the correct amount of sales tax from your customers to ensure you are complying with your sales tax obligations.

Schedule a free consultation today to learn more!

The full story:

As businesses experience increasing costs, they are looking for creative ways to recover some of those costs without expressly raising the price of their goods and services. The result is that consumers are seeing more “fees” added to their invoices. For example, over the last several years, restaurants have added variously named fees to cover increases to labor costs following state minimum wage legislation.

Are these “fees” subject to sales tax? Not surprisingly, the answer will depend on each state’s specific rules. Recently, Georgia and South Carolina released guidance addressing this issue.

Georgia guidance

On October 31, 2022, the Georgia Tax Tribunal (Tribunal) issued a decision in which it ruled that Uber’s Booking Fee, formerly known as a Safe Rides Fee, charged during the audit period of July 23, 2012 to June 30, 2015, was subject to sales tax.[1] Georgia Code Ann. § 48-8-2(34) defines sales price as:

  • “Sales price” applies to the measure subject to sales tax and 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:
  • 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.
  • Sales price shall not include:
  • 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,
  • 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.

Based on the broad nature of this definition and the fact that nothing covered by the Booking Fee (compliance costs, insurance costs, driver background checks, etc.) is specifically excluded or deducted from the definition of the sales price, the Tribunal concluded that the Booking Fee was subject to Georgia sales tax.

South Carolina guidance

The South Carolina Department of Revenue (Department) recently issued Revenue Ruling #22-10, in which it addressed the taxability of various fees that sellers are adding to their invoices to combat increasing costs, such as “inflation fees” and credit card “convenience fees.” Similar to Georgia’s definition of “sales price,” the South Carolina definition of “gross proceeds of sales” includes the total consideration received without deduction for expenses, and there are limited exclusions.[2] Based on this broad definition, the ruling concluded that these fees are included in the sale tax base.

The bottom line

As sellers face increasing costs, they may continue to charge fees to their customers to cover these additional expenses instead of raising prices on their advertised goods and services. Generally, if these fees are mandatory and are imposed in connection with the sale of a taxable good or service, sellers need to consider whether these fees should be included in the sales tax base. Failure to do so may result in the seller under-collecting sales tax and having to pay out-of-pocket to make up the difference.

Aprio’s SALT team has experience identifying and analyzing these issues. We can assist your business to ensure that you are collecting the correct amount of sales tax from your customers so that you comply with your sales tax obligations and do not incur unexpected tax liabilities and penalties. 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 Betsy Goldstein, SALT Manager, at [email protected] or Jeff Glickman, partner-in-charge of Aprio’s SALT practice, at [email protected] for more information.

This article was featured in the December 2022 SALT newsletter.


[1] Uber Technologies, Inc. v. Georgia Dep’t of Rev., Georgia Tax Tribunal, Docket No. 1834258 (Oct. 31, 2022).

[2] S.C. Code §§ 12-36-90 (definition of “gross proceeds of sale” for sales tax purposes) and 12-36-130 (definition of “sales price” for use tax purposes). These definitions are very similar.

Disclosure

Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding the matter.

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About the Author

Jeff Glickman

Jeff Glickman is the partner-in-charge of Aprio, LLP’s State and Local Tax (SALT) practice. He has over 18 years of SALT consulting experience, advising domestic and international companies in all industries on minimizing their multistate liabilities and risks. He puts cash back into his clients’ businesses by identifying their eligibility for and assisting them in claiming various tax credits, including jobs/investment, retraining, and film/entertainment tax credits. Jeff also maintains a multistate administrative tax dispute and negotiations practice, including obtaining private letter rulings, preparing and negotiating voluntary disclosure agreements, pursuing refund claims, and assisting clients during audits.

(770) 353-4791