Contractor FAQs

  • Who is a contractor?

    A contractor is any person who orally, in writing, or by purchase order contracts to furnish tangible personal property and to perform services under contract. O.C.G.A. 48-8-63 

    Types of contractors 

    • General Contractor (GC) or prime contractor is any person who performs a contract all by itself, or through the use of subcontractors whose activities it supervises and coordinates.
    • Subcontractor (sub or junior) performs contract activities for the GC.
    • Nonresident contractor is a contractor (sub or GC) who has not had a permanent place of business in Georgia for at least a year.
  • Why should I register as a contractor?

    Contractor registration 

    ALL contractors, resident, nonresident, general and subs, must register for a sales and use tax number. Contractors are end-users and are liable for sales and use tax on all tangible personal property used and consumed in the performance of a contract. 

    O.C.G.A. 48-8-63

  • If I do not register what are the consequences?

    Each person failing to register as required by this article or failing to execute the required bond before beginning the performance of any contract shall be denied the right to perform the contract until he complies with registration and bond requirements. 

    O.C.G.A 48-13-33

  • What are the tax rules regarding contractors?

    Contractors must file a sales and use tax return on a monthly basis even if there is no sales or use activity.

  • What should I do if I am supplied materials for the job?

    If a contractor is provided materials on which no sales tax was paid, the contractor must accrue use tax on the materials received when the materials will be used to perform a contract and the materials will become part of real property. 

    O.C.G.A. 48-8-63

  • What are the bonding requirements for contractors?

    Resident contractors have no bonding requirements. 

    Nonresident contractors have bonding requirements if the contract the contractor will be performing is $10,000 or greater.  They must submit thru a surety a nonresident performance tax bond which must be at least 10% of the contract price. 

    They must also pay a $10 fee for each contract over $10,000.

    O.C.G.A. 48-13-32 

  • Does Georgia require money to be withheld from a contractor for jobs performed?

    Yes and No 

    No “retainage” is withheld on resident contractors and nonresident contractors whose job is less than $250,000. If there are contractual stipulations between the GC and subcontractors regarding withholding money, Georgia does not require the GC to withhold any funds. 

    Yes. If the contract to be performed by the nonresident contractor is $250000 or greater 2% must be withheld on behalf of the State. Unless the general contractor receives confirmation of a nonresident contractors bond from the DOR. 

    If a nonresident has not supplied the General Contractor with proof of the nonresident performance tax bond 2% must be withheld.

  • My contract is over $250,000 and I do not want the general contractor to withhold any funds. Is there anything I can submit to negate “retainage” being withheld?

    To avoid withholding of payments from the general/prime contractor a nonresident contractor must have a sales and use tax bond on file for any contract greater than $250,000. This bond is submitted at the same time the job is being registered with the nonresident performance tax bond. The amount of the sales and use tax bond depends on the amount of the contract.

    Receipts: 

    • Less than 250K-no bond
    • 250-500k- 5k
    • 500-750k- 20k
    • 750-1MM- 30k
    • Greater than 1MM- 50k 

    ^^^^^ - is the first number the bond amount?

    O.C.G.A. 48-8-63

  • Are freight and transportation charges taxable?

    When tangible personal property is sold F.O.B. destination and/or the transportation cost is passed to the purchaser by the seller, it is subject to tax.

  • Are shipping and handling charges taxable?

    Yes, if the property is shipped in the seller’s vehicle or F.O.B. destination.

  • Are labor charges exempt?

    Repair and installation labor are exempt when separately stated on an invoice. If not separately stated, labor charges are taxable. Fabrication labor is taxable unless the total sale is exempt.

  • Are repair charges taxable?

    Materials used in repair are subject to tax. Installation or repair labor is not subject to the tax when separately stated on the invoice.

  • Can contractors purchase tangible personal property tax exempt?

    No. Contractors are deemed consumers of tangible personal property used in a construction project and must pay tax at the time of purchase. This is true even if the materials are used in contracts performed for government agencies.

  • Is use tax due if property is purchased from a foreign vendor (out-of-state seller)?

    Yes.

  • Company A sells to Company B (out-of-state company) and drop ships to Company C (a Georgia company). Is Company A required to collect sales tax?

    Yes. Company A must collect tax on this transaction or obtain a Certificate of Exemption from Company B’s Home State.

  • Company A (an out-of-state company) leases tangible personal property to a customer in Georgia. Must company A collect sales tax or is the customer obligated to pay the tax to the state?

    Company A must collect sales tax on the sale or lease of all property which is delivered into the State. Tax must be collected on the gross lease or rental receipts.

  • Are parts covered under factory warranty taxable?

    Parts exchanged under a warranty are not taxable. However, if any charge is made for parts, it would be subject to the tax.

  • Are parts covered under an extended warranty or maintenance agreement taxable?

    The cost of any parts used to repair property which is covered under the warranty or maintenance agreement is subject to sales and use tax, just as are parts used to repair property which is not covered under an extended warranty. The service provider is responsible for the tax.