Compilation of Rules and Regulations of the State of Georgia › Department 560 - RULES OF DEPARTMENT OF REVENUE › Chapter 560-12 - SALES AND USE TAX DIVISION › Subject 560-12-1 - ADMINISTRATIVE RULES AND REGULATIONS › Rule 560-12-1-.14 - Withdrawals from Inventory

Current through Rules and Regulations filed through June 27, 2024
(1)
Purpose.
This Rule explains
				the application of sales and use tax to tangible personal property purchased
				under terms of resale that is subsequently withdrawn from inventory by a
				retailer, dealer, manufacturer, processor, or converter for any use other than
				retention, demonstration, or display while holding the property for sale in the
				regular course of business.
(2)
Definitions.
For purposes of
				this Rule, the following definitions and explanations of terms shall apply:
(a) "Contractor" means any person who orally,
				in writing, or by purchase order contracts to furnish tangible personal
				property and to perform services under the contract.
(b) "Cost price" means the actual cost of
				articles of tangible personal property without any deductions for the cost of
				materials used, labor costs, service costs, transportation charges, or any
				other expenses of any kind.
(c)
				"Dealer" means any person who is a dealer as defined in O.C.G.A. §
										48-8-2(3), including but not limited to retailers, manufacturers, wholesalers, and
				distributors.
(d) "Fair rental
				value" means the amount a dealer would have charged for an arm's length, bona
				fide rental or lease of tangible personal property in the regular course of
				business at the time such property was withdrawn from inventory.
(e) "Fair market value," for purposes of
				self-produced property withdrawn from inventory by manufacturers, processors,
				or converters, is the amount a knowledgeable buyer would pay for the property
				and a willing seller would accept for the property at an arm's length, bona
				fide sale. In other words,"fair market value" is the sales price at which
				property would have been offered for sale in the regular course of business at
				the time it was withdrawn from inventory. Discounts applied in the regular
				course of business may be deducted when calculating fair market value. When
				property is offered for sale at varying prices based on volume discounts,
				close-out pricing, or other factors, fair market value may be calculated using
				the average sales price at which the property was offered for sale over the 12
				month period before the property is withdrawn. With respect to property when no
				ready market exists for its sale, taxpayers or the Department may provide
				additional information that is reasonable, relevant and useful to the
				determination of fair market value.
(f) "Industrial materials" means materials
				that are purchased for future processing, manufacture, or conversion into
				articles of tangible personal property for resale when the materials become a
				component part of the finished product. The term also means materials that are
				coated upon or impregnated into the product at any stage of its processing,
				manufacture, or conversion, even though such materials do not remain a
				component part of the finished product for sale. The term "industrial
				materials" includes "raw materials".
(g) "Retailer" means every person making
				sales at retail or for distribution, use, consumption, or storage for use or
				consumption in this state.
(h)
				"Retention, demonstration, or display" means holding property in inventory for
				sale in the regular course of business, and demonstrating or displaying the
				property's characteristics while holding the property in resale inventory. The
				term does not include the use of such property in the day-to-day operations of
				a business; the personal use of such property by employees or others; or the
				use of such property where the business lists the property as an asset other
				than inventory on its books and records, whether or not the listed item is
				expensed or capitalized, even if the capitalization is recaptured if the item
				is subsequently sold. Any use other than retention, demonstration, or display
				while holding the property for sale in the regular course of business
				constitutes a taxable use of the property.
(i) "Sales price," for purposes of
				self-produced property withdrawn from inventory by manufacturers, processors,
				or converters, means the total amount for which tangible personal property is
				sold in the regular course of business without any deduction from the total
				amount for the cost of the property sold, the cost of materials used, labor or
				service costs, losses, or any other expenses of any kind. The sales price is
				deemed to be the price at which purchasers and sellers, both having reasonable
				knowledge of the property and being under no compulsion, are willing to do
				business (i.e., the amount a knowledgeable purchaser would pay for the property
				and a willing seller would accept for the property in an arm's length, bona
				fide sale).
(j) "Taxable purpose"
				means any use other than retention, demonstration, or display while holding
				property for sale in the regular course of business. The term does not include
				withdrawals of property from inventory for sale or for further manufacturing or
				processing.