Georgia Sales Tax on Software and Digital Products
Georgia’s approach to software sales tax and SaaS sales tax presents unique challenges for businesses offering digital goods and cloud-based services. While Georgia does not tax many electronically delivered software products or services, nuances such as the purchaser’s usage rights, delivery method, and contract bundling can quickly shift a transaction from exempt to taxable.
Understanding Georgia’s rules is
essential for companies that license software, offer maintenance or implementation services, or operate SaaS/PaaS platforms.
Page - Table of Contents
Taxability of Software in Georgia
- Prewritten Software
- Custom Software
Cloud-Based Services in Georgia
- Software as a Service (SaaS)
- Platform as a Service (PaaS)
Implementation & Installation Services
- Onsite
- Remote - Live
- Remote - Pre-recorded
- Optional
- Mandatory
Exemptions and Special Considerations in Georgia
Compliance Tips for Businesses
Taxability of Software in Georgia
Georgia distinguishes software taxability primarily by delivery method and usage rights.
Prewritten Software
Prewritten software is non-taxable when delivered electronically and the purchaser does not receive permanent use rights. However, when prewritten software is sold with permanent rights, it becomes taxable, even if accessed electronically. The delivery method (download vs. access) does not alter the taxability when permanent rights are involved.
Custom Software
Custom software is generally treated as a non-taxable service in Georgia. As long as the software is developed to meet a client’s unique specifications and delivered electronically, it is not considered tangible personal property and remains exempt from sales tax.
Georgia Cloud-Based Services
Software as a Service (SaaS)
SaaS is non-taxable in Georgia. The state has not issued direct guidance, but its interpretation of electronically delivered software as non-tangible personal property means SaaS is not subject to sales tax.
Platform as a Service (PaaS)
Like SaaS, PaaS is also non-taxable when delivered electronically. Georgia treats these cloud-based platforms as non-tangible services, exempt from sales tax under current rulings.
Hardware & Tangible Items
Computer hardware, including physical servers, laptops, and peripherals, is taxable in Georgia. Hardware is treated as tangible personal property and is subject to standard sales tax unless it qualifies for a specific exemption.
Implementation & Installation Services
How software setup services are invoiced determines their taxability. Georgia distinguishes between separately stated service charges and those bundled with taxable software.
- Non-taxable when installation or setup charges are separately itemized on the invoice.
- Taxable when these charges are bundled with taxable software, such as prewritten software delivered on physical media.
Careful invoice separation is key to ensuring installation services remain exempt from sales tax.
Training Services
Georgia taxes only specific identified services. Training services do not fall into that category and are generally non-taxable, provided they are separately stated.
Onsite
Onsite training services are non-taxable, assuming they are not bundled with taxable software.
Remote - Live
Live remote training is also non-taxable when separately billed and not a condition for the software purchase.
Remote - Pre-recorded
Pre-recorded training materials are similarly non-taxable, unless the content is bundled as part of a taxable software package.
Maintenance Agreements
Georgia’s treatment of maintenance agreements is nuanced and depends on whether the agreement is for prewritten software and how the charges are structured.
Optional
Optional maintenance agreements are not taxable when related to custom software or when they include services such as technical support, troubleshooting, or helpdesk assistance.
Mandatory
Mandatory maintenance agreements are also not taxable if they are bundled with non-taxable custom software and provide non-tangible services like updates or technical support. Clear contract language and invoice detail are essential to support exemption claims.
Exemptions and Special Considerations in Illinois
Businesses can qualify for exemptions under specific conditions. For example:
- Software sold for resale with a valid resale certificate is exempt
- Electronic delivery of software without permanent rights can avoid tax
- Clearly separating line items on invoices helps preserve exemption eligibility for services like support or training
Compliance Tips for Businesses
To navigate Georgia’s software sales tax and SaaS sales tax rules effectively:
- Classify software by delivery method, customization level, and access rights
- Separate charges for support, implementation, and training on invoices
- Track exemption certificates for resale or exempt use
- Review contracts for bundled services or tangible software components
- Stay current with Georgia Department of Revenue bulletins and rulings
Key Takeaways
Georgia generally does not impose sales tax on software or digital services unless the transaction involves permanent use rights or tangible delivery. This means that many cloud-based solutions and electronically delivered services can remain exempt, provided they meet the state’s criteria.
Prewritten software becomes taxable when it is sold with permanent usage rights, especially if delivered via physical media or downloaded in full. In contrast, custom software and cloud-hosted services like Software as a Service (SaaS) and Platform as a Service (PaaS) are typically not taxed when delivered electronically and not bundled with tangible goods.
Professional services including training, implementation, and support are non-taxable if separately stated on the invoice. Maintenance agreements are more nuanced; they may be partially taxable, particularly if bundled or if they include software updates or deliverables.
Businesses must be intentional in how they structure and document these transactions. Clear invoicing, contract language, and understanding Georgia’s tax distinctions are essential for compliance and audit risk reduction.
Need Help Navigating Georgia Software and SaaS Sales Tax?
Agile Consulting Group helps businesses simplify software sales tax and SaaS sales tax compliance in Georgia. From cloud-based software access to prewritten licensing and maintenance agreements, we assist companies in evaluating product taxability, structuring contracts, and reducing audit risk.
