Georgia Letter Ruling: LR SUT-2026-02

Department of Revenue Seal. David Burge, Commissioner. Kelsey Finn, Director, Tax Policy

This letter is in response to your request for guidance on the applicability of Georgia sales and use tax on DNA testing services provided by [redacted Taxpayer].

Facts

Taxpayer is an online provider of ancestral and health history reports to individual customers. The reports are generated from the company’s analysis of the customers’ DNA (saliva specimens). The customers collect their own saliva using a kit which is mailed to them by the company from a distribution center located in [State 1]. Once the customer has used the kit, they mail it from their home to a company-owned lab in Georgia where the DNA specimens are processed. The customers then access their individualized, personal reports through the company’s website.

Taxpayer considers the situs of the sale to be the ship-to location of the customer (the address to where the kits are initially mailed), and presumably the location from which the customer will access the company’s website to view their individualized reports. Taxpayer further asserts that the cost of the kit ([amount redacted]) relative to the cost of the service ([amount redacted]) is nominal and the use of the kit is integral to the provision of the service.

Taxpayer states that use tax does not apply in Georgia to the kits used in collecting the saliva samples because use tax is paid to [State 1] when the kits are shipped to customers.

Issues

  1. Where is the service to the customers deemed to be provided?
  2. If the service is deemed to be provided in Georgia, how will the state categorize the service being provided to taxpayer’s customers?
  3. Given the use of TPP (the specimen-collecting kit) in performance of the service, would the state consider the non-taxable service “bundled” with the TPP to be taxable?
  4. Are the kits used by the customers to collect their saliva samples subject to use tax in Georgia?

Analysis

Georgia levies and imposes a tax (subject to certain specific exemptions) on the retail purchase, retail sale, rental, storage, use, or consumption of tangible personal property and on certain services. [1] A “retail sale” is any sale, lease, or rental for any purpose other than for resale, sublease, or sub rent. [2] A “sale” is any transfer of title or possession, transfer of title and possession, exchange, barter, lease, or rental, conditional or otherwise, in any manner or by any means of any kind of tangible personal property for a consideration. [3]

Sourcing 

When the product is not received by the purchaser at a business location of the seller, the sale is sourced to the location where receipt by the purchaser, or the purchaser's donee, designated as such by the purchaser, occurs, including the location indicated by instructions for delivery to the purchaser or donee, known to the seller. [4]

When the customer receives the DNA testing kit at their designated Georgia address, the sale is sourced to Georgia.        

Categorization of the Service

Services are not subject to sales tax unless specifically designated as taxable. [5] DNA testing services are not specifically taxed in Georgia.

Bundled Transaction and Primary Purpose of the Customer 

Bundled transaction means the retail sale of two or more products, except real property and services to real property, where the products are otherwise distinct and identifiable and the products are sold for one non-itemized price. A bundled transaction does not include the sale of any products in which the sales price varies, or is negotiable, based on the selection by the purchaser of the products included in the transaction. [6] A transaction that otherwise meets the definition of a bundled transaction as provided under this paragraph shall not be a bundled transaction if such transaction is the retail sale of tangible personal property and a service where the tangible personal property is essential to the use of the service, is provided exclusively in connection with the service, and the true object of the transaction is the service. [7]

When a transaction involves both a transfer of tangible personal property and the provision of nontaxable services, the taxability turns on the purpose of the customer: whether the customer is primarily interested in buying the services provided or the tangible personal property transferred in conjunction with the services. [8]

The DNA testing kit and DNA testing service are distinct and identifiable products included in one non-negotiable purchase price. The kits are essential to the use of the DNA testing and are provided exclusively in connection with the service. Taxpayer is a DNA testing service provider through use of a testing kit which customers submit to Taxpayer to receive test results via report. Essentially the true object of the transaction is the testing service, therefore a bundled transaction is not created. 

DNA Testing Kits 

Service providers are deemed to be the consumers of certain tangible personal property used or consumed during the provision of a service if the service provider does not separately charge for such property. This category includes property that loses its identity when used and consumed during the provision of services and property that is deemed to be an inconsequential element of the service transaction. [9] The service provider is liable for the use tax on the cost price of such tangible personal property. 

The DNA testing kit is tangible personal property used by Taxpayer to perform the DNA analysis. As the service provider and end user of the kit, Taxpayer is subject to use tax on the testing kits.

Georgia has use tax reciprocity with [State 1]. The amount of like use taxes that [State 1] lawfully imposes on Taxpayer can be credited towards its use tax in Georgia upon proof of payment of the tax. [10]     

Rulings

  1. The service transaction is sourced to Georgia when the kit is delivered to the purchaser’s designated Georgia address. 
  2. The DNA testing service is not taxable to Georgia. 
  3. Georgia does not consider the sale of the DNA testing service and specimen collecting kit to be a taxable bundled transaction because the service is the primary purpose for the transaction. The DNA testing service is not taxable to Georgia. The DNA testing kit is subject to use tax. 
  4. Taxpayer is liable for Georgia use tax on the DNA testing kits because Taxpayer is the consumer of the kit. Taxpayer may claim a credit against tax due to Georgia for like sales and use taxes lawfully imposed by another state. 

The opinions expressed in this ruling are based upon the information contained in your request and limited to the specific transaction and customer in question. Should the circumstances regarding the transactions change or differ materially from those represented, then this ruling may become invalid. In addition, please be advised that subsequent statutory or administrative rule changes or judicial interpretations of the statutes or rules upon which this advice is based may subject similar future transactions to a different tax treatment than that expressed in this response.

Footnotes

[1] O.C.G.A § 48-8-30(a)

[2] O.C.G.A § 48-8-2(31)

[3] O.C.G.A § 48-8-2(33)

[4] O.C.G.A § 48-8-77(b)(1)(B)

[5] O.C.G.A § 48-8-2; 48-8-30

[8] O.C.G.A § 48-8-2(3)(A)

[7] O.C.G.A § 48-8-2(3)(A-D)

[8] See Craig-Tourial Leather Co. v. Reynolds, 87 Ga. App. 360 (1952)

[9] Ga. Comp. R. & Regs. R. 560-12-1-.14(7)(d)

[10] [citations omitted]