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Refund for Restaurants? New Georgia Regulations Clarify Sales Tax Rules

The Georgia Department of Revenue has issued a new regulation that clarifies the sales and use tax rules for restaurants and other establishments that sell prepared food.

Rule 560-12-2-.115 is highly relevant to taxpayers in the food and beverage industry. It enumerates taxable and tax-exempt items and provides concrete examples explaining how the sale of food and purchase by restaurants are to be taxed in the State of Georgia.

The Department has clarified that several purchases by restaurants are exempt from sales tax, including the following:

  • Food packaging — single-use, disposable packaging containing food that is provided to the customer.
  • Items for sale — food ingredients or components of meals that will be resold by the restaurant.
  • Single-use items provided with meals — disposable items made available to customers as a part of a meal, including straws, stirrers, napkins, disposable silverware, toothpicks, tray liners and wet-naps.
  • Food items provided with meals sold — includes condiments and other items available to customers without a separate charge, such as bottled condiments left on tables, condiment packets and complimentary bread or chips.

Further, the Department has also identified certain items often overlooked by restaurants that are subject to sales and use tax, including the following:

  • Mandatory gratuities — whether negotiated in advance of a meal, unilaterally added by the seller or mandatory under certain conditions (such as when a defined percentage is added for parties of a certain size when not conspicuously stated that the amount may be removed).
  • Items used or consumed by the restaurant —includes the cost of complimentary meals provided to customers or employees, restaurant decor, serving utensils, flatware, linens, placemats and single-use items that are not a component of a meal sold to a customer.
  • Other service charges — any other charges by a restaurant that are necessary to complete a taxable sale, including delivery fees and bartender service.

Potential for sales & use tax refunds for restaurateurs and franchisees

If you’ve paid tax on the purchase of items that the Regulation clarifies as exempt, you can request a refund of the sales tax erroneously paid within the past 3 years.

Examine past invoices from food service vendors to determine whether tax was assessed on exempt items. If The assessed sales tax would be present as a separate line-item on the invoice.

If you discover exempt items, pull the related invoices you have on file or request this information and all related invoices from the past 3 years from the vendor.

To request a refund in line with OCGA Section 48-2-35.1

  1. You (restaurateur or franchisee) send a written refund request plus a completed Form ST-5 Exemption Certificate to the relevant vendor. The vendor may either request a refund directly on behalf of the restaurant or can provide the restaurant with a completed Form ST-12A Refund Waiver.
  2. If the vendor sends you back a completed Form ST-12A Refund Waiver, you may apply directly for a refund with the Department of Revenue. To do this, file a Form ST-12 Refund Request and attach the vendor’s completed Form ST-12A.
  3. If the vendor does not want to issue a refund to you directly or does not provide a Form ST-12A within 90 days, you may file a refund claim directly with the state by completing the Form ST-12 Refund Request and including a Form ST-12B Purchaser’s Affidavit.

Bottom line

Requests for refunds may take up to a year for the state to process and the taxpayer is often required to provide supporting documentation, including invoices, to the Department of Revenue.

If you are a restaurateur or franchisee and need assistance requesting refunds of overpaid sales tax, let us help. At Aprio, we help clients like you keep more of their hard-earned money.

Get in touch with Tommy Lee, partner-in-charge of Retail, Franchise and Hospitality, at tommy.lee@aprio.com, or Jeff Glickman, partner-in-charge of State and Local Tax, at jeff.glickman@aprio.com.

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 this matter.

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