News and Insights

Georgia Legislature Revises Exemption Relating to the Sale or Lease of Certain Computer Equipment

Tax Development May 31, 2002

The Georgia Legislature has passed a bill that will amend Official Code of Georgia Annotated ("O.C.G.A") §48-8-3 (68), concerning sales and use tax exemptions for the sale or lease of certain computer equipment to high technology companies. A high technology company as defined by O.C.G.A §48-8-3 (68) is a company classified under the following North American Industry Classification codes: 51121, 51331, 51334, 51421, 52232, 54133, 54171, 54172, 334413, 334611, 513321, 513322, 51491, 541511, 541512, 541513, or 541519. To qualify for the exemption, the computer equipment must be incorporated into the facilities of a high technology company and the sale of such equipment or the fair market value of leased equipment must exceed $15 million in a calendar year.

Effective October 1, 2002, House Bill 1441 Section 3 will strike portions of paragraph (68) and replace it with new language that further requires the computer equipment be used for specific functions. The amended O.C.G.A §48-8-3 (68)(C) indicates that the computer equipment must be designed to store or manage production data, host production applications, host application systems development activities, or host application development testing. Paragraph (68)(C) also excludes certain items such as telephone central office equipment or equipment with imbedded hardware or software used primarily for training, product testing, or in the manufacturing process from its definition of exempt computer equipment. Additionally, Paragraph (68)(D) states that a company that qualifies for the exemption and is affiliated in any way with a non-qualified company must conduct the majority of its business with non-affiliated entities.