The Georgia Department of Revenue ("Department") released a letter ruling discussing the taxability of refurbished replacement parts.
The taxpayer sold equipment with optional maintenance agreements to customers. Under these agreements, the taxpayer would replace worn, obsolete, or defective equipment parts with new or refurbished parts. The taxpayer refurbished these used parts into replacement parts for other customers. The taxpayer asked whether tax was due on these refurbished parts.
Georgia taxes retail sales of tangible personal property. "Sale" means any transfer of title or possession in any manner in exchange for something of value. "Retail sale" means a sale for any purpose other than resale. "Resale" means a sale for the purpose of reselling property to consumers. If a purchaser does not pay sales tax at the time of purchase, use tax is due upon the first instance of use.
The refurbished replacement parts were taxable because they were acquired in a retail sale. The parts became the taxpayer's property in exchange for replacement parts. This was a sale. The taxpayer did not resell the parts; it repaired them for reuse. Because this was not a sale for resale, it was a taxable retail sale.