By Stephanie Dodson Dougherty
Nonresident contractors and subcontractors who plan to perform work in Georgia must register their business with the Georgia Department of Revenue for tax purposes. This registration must be completed within six months before or after the start date for the Georgia work. Tax types for which nonresident contractors must register include Sales and Use, Prepaid Wireless 911 Charge, Payroll Withholding, International Fuel Tax, Alcohol Tax, Tobacco Tax, Motor Fuel Distributor, and Miscellaneous Withholding. New businesses registered in Georgia must file a tax return monthly for six months, after which the business may change their filing frequency.
Registration requires various forms depending on the type of work to be performed and the contract price to be paid. Basic required information for registration includes business type, legal name, contact information, an operational and monitored email address, FEIN, and other taxpayer information. Registration also requires the names and detailed information for company officers and responsible parties. Partnership and LLCs are required to register at least two officers. Each business registration costs a small processing fee.
NAICS codes are also required. The North American Industry Classification System (NAICS) is the standard used by federal statistical agencies in classifying business establishments for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economy. Careful attention should be paid when determining the proper NAICS codes for one’s business. The most recent catalogue of codes is the official 2012 U.S. NAICS Manual, which includes definitions for each industry, background information, tables showing changes between 2007 and 2012, and a comprehensive index. This Manual is available online at http://www.census.gov/cgi-bin/sssd/naics/naicsrch?chart=2012.
Business registration requires various Georgia Department of Revenue forms depending on the contract under which one plans to perform in Georgia. Nonresident contractors and subcontractors should be prepared to issue a Power of Attorney and bonds proportional to the contract price. For contracts over $250,000.00, optional supplemental bonds are available, under which a 2% retainage is required. Additional filing is required after project completion to release any retainage held.
Although some information about this registration process in available online, the Georgia Department of Revenue’s website and rules have not been updated to match the most recent statutory requirements. Additionally, each registration presents unique and often unforeseeable challenges. Therefore, it is advisable to consult an attorney whenever a business attempts to complete a new business registration in Georgia. If you have any questions about starting this process, please feel free to contact us.
In today’s mobile society, it is easy to forget that each state regulates contractors differently. Here in Georgia, for example, out-of-state contractors (and sub-contractors) who work on Georgia construction projects with a contract price greater than $10,000.00 must register with the Commissioner of Revenue. (See, O.C.G.A. § 48-13-30 through O.C.G.A. 48-13-38). What do these “nonresident” contractors need to register for? A Sales and Use Tax Certificate of Registration.
In addition to the act of registering, each nonresident contractor shall report to the department of revenue’s commission any tax liability which the contractor may have. Furthermore, this code section may require the foreign contractor to file a bond with sufficient sureties that all taxes which may accrue to the State of Georgia (and its political subdivisions) will be paid on demand. Also, the Georgia Code requires that the registration and bond be in place before beginning performance of any contract with a value greater than $10,000.00. It also requires that the nonresident contractor appoint the Georgia Secretary of State as their representative in the State of Georgia to accept service of process.
If a foreign contractor begins to perform work in Georgia in and fails to register with the commission, then they may be subjected to several penalties including the following: (i) an injunction may issue preventing the work until the nonresident contractor or subcontractor complies with the Georgia statutes, (ii) a nonresident contractor may be prohibited from filing an action to recover payment for performance on the contract in Georgia courts, and (iii) they may be charged with a criminal misdemeanor.
Each year, we get several questions from out-of-state contractors who failed to register with the commissioner prior to performing the work regarding whether or not they can file a mechanics lien. While the Act does not specifically state the unregistered contractor cannot file a mechanics lien, it may leave room for a challenge. Fortunately, there has been some case law that allows a construction lien to be enforced in Georgia so long as the unregistered contractor registers with the commission before filing suit (better late than never), but we do not recommend taking this risk. If you are coming into Georgia from another state to work on a Georgia construction project, and your contract is valued more than $10,000, please register with the state.