The Sandy Springs, Georgia, City Council revised its Business and Occupation Tax ordinance on December 21, 2010 in an effort to foster economic development and alleviate the potential chilling effect on the City’s business climate. The amendments lower the maximum tax, implement an across-the-board rate reduction, and provide for the exclusion of out-of-state service receipts and franchise fees. The amendments represent an important change in the City’s existing policy, placing the City’s application of local taxes in line with other local jurisdictions within the state, and allowing the City to remain competitive as an attractive location for national headquarters.

Background

As background, the City of Sandy Springs has imposed a business and occupation tax on the gross receipts of businesses operating in the City since 2006. Sandy Springs, Ga., Code of Ordinances § 54-115 et seq. Specifically excluded from the definition of “gross receipts” are, among other things, “[p]roceeds from sales of goods or services that are delivered to or received by customers who are outside the state at the time of delivery or receipt.” Sandy Springs, Ga., Code of Ordinances § 54-115 . However, Sandy Springs had previously taken the position that it was entitled to tax gross receipts from sales of services to customers located outside the state. This position had a particularly unfavorable impact on businesses headquartered in Sandy Springs that receive service receipts and franchise fees on a national and international basis.

To enforce its new tax position, the City contracted with private auditors paid based on a percentage of tax assessments. As of September 15, 2007, the tax was capped at $400,000 and had the potential of being applied on a separate legal entity basis.