Georgia Amends Sales Tax Rules for High-Tech Infrastructure
In 2025, Georgia implemented significant updates to its sales and use tax regulations, particularly impacting the retail sales of specified digital equipment and digital goods. These changes, driven by amendments to Rule 560-12-2-.107 and new rules on digital product taxation, reflect the state’s evolving approach to modern commerce and technology. Businesses operating in Georgia — especially those in high-tech sectors — must now navigate a more complex tax landscape with new opportunities and challenges.
Key Changes
Under the updated Rule 560-12-2-.107, the Georgia Department of Revenue (“DOR”) has amended the scope and conditions for sales tax exemptions for computer equipment at high-technology companies.
Computer Equipment
The Georgia DOR narrowed the definition of “computer equipment” by excluding from exemption the following items:
- Hardware or software used primarily for training, product testing or manufacturing.
- Scanners
- Repair parts for maintenance or repair of a computer system’s hardware.
- Smartphones
- Tablets
- Wearables
- Prewritten software
Beginning July 1, 2024, each taxpayer claiming the exemption must pay 10% of all state and local sales and use taxes imposed on the first $15 million of computer equipment purchased each year for which the exemption is claimed.
Those making a tax-free purchase under this exemption must report and remit to the Georgia DOR the tax imposed under O.C.G.A. Section 48-8-3(68)(A)(ii) on the sales and use tax return that is next due after the purchase.
However, if taxpayers are claiming this exemption by refund, they will receive a refund of 90% of the tax imposed on the first $15 million of eligible purchases for which the exemption is claimed under O.C.G.A. Section 48-8-3(68).
Exemption Requirements
There are certain requirements to be able to claim this exemption. This applies to companies that are classified as high-technology companies under the NAICS codes.
- Computer equipment must be purchased or leased exclusively for operational use within the state at a high-technology company.
- Only high-technology companies are eligible to claim sales or leases exclusively for operational use in Georgia.
- Only high-technology companies are eligible to claim an exemption limitation.
- The total combined value of all computer equipment purchased or leased during any calendar year must be equal to or exceed $15 million.
Additional requirements may apply depending on the facts and circumstances.
Purpose
The Georgia DOR made these changes to focus on essential infrastructure investments for high-technology companies, rather than general-purpose consumer electronics.
These regulatory updates have multiple implications, which are as follows:
- Increased Compliance Burden: Businesses must maintain detailed records to substantiate exemption claims and ensure accurate reporting of taxable purchases. Misclassification could lead to audits and/or penalties.
- Strategic Purchasing Decisions: High-tech companies may need to time or structure purchases to optimize tax benefits.
- Pricing and Product Structuring: Sellers of computer equipment must reassess how they bundle products and services. Clear delineation between taxable and exempt items is essential to avoid over-taxation.
- Impact on Consumers: End-users may experience price increases due to the added tax burden.
- Competitive Dynamics: Georgia’s move aligns with more than half of the states to potentially level the playing field for local businesses competing with out-of-state companies.
Conclusion
Georgia’s 2025 tax reforms reflect a broader trend of modernizing tax codes to capture revenue from digital commerce and high-tech infrastructure. While these changes introduce complexity, they offer clarity and structure for businesses investing in digital transformation. Companies operating in Georgia should consult with a member of Withum’s SALT team to ensure compliance and effectively leverage available exemptions.
Author: Bonnie Susmano, JD, MBA | [email protected]
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