Tax Bill Passes Out of Committee; Heads to House Floor Debate

By Mike Klein

Mike Klein, Public Policy Forum Editor

Georgia online shoppers could begin to notice changes in their internet purchase sales taxes three months sooner than originally announced.  The new effective date would be October 1 – just in time for holiday shopping – rather than on New Year’s Day which was the original date.

The announcement was made Tuesday morning during the second and possible final meeting of the House – Senate revenue committee that oversees tax reform.  House Bill 386 passed out of committee on a voice vote after a 13-minute hearing and no witnesses.   The bill moves to the House for debate and a possible vote today.  The track is fast; the bill was introduced Monday.

A 1992 U.S. Supreme Court ruling exempts retailers from having to collect and pay sales taxes in states where they have no physical presence – known as nexus. States have looked for an internet sales tax option since the ruling and especially since the Recession dwindled revenues.

New York in 2008 was the first state to expand the definition of “nexus” to include affiliates doing business on behalf of an internet retailer.  Rhode Island followed suit in 2009.  Sales taxes paid by out-of-state online retailers are often referred to as Amazon taxes because of Amazon.Com, the behemoth online shopping site.

Amazon and North Carolina went to war after the state imposed passed a 2009 law similar to those in New York and Rhode Island.  The online publication TechJournal reported North Carolina claimed Amazon or its customers owed $50 million in unpaid sales taxes dating back to 2003.  Amazon discharged all of its affiliates, which harmed those businesses.  TechJournal said there also has been a negative impact on start-up businesses.

Rather than fight with each other, last year Virginia reached an agreement with Amazon.  The company agreed to collect sales taxes just like any physical retailer.  The company also said it would open two fulfillment centers in Virginia, investing $135 million and creating 1,350 jobs.

The Tax Foundation position is that the so-called Amazon tax is unconstitutional.  It described the New York Law as “an unprecedented expansion of state taxing authority.”  It said exposure to these kinds of taxes would make it less likely for businesses to expand into those states.

Georgians are already required by law to monitor the sales tax they would owe by making online purchases from out-of-state retailers.  And in theory, they are supposed to pay tax to the state. The fiscal note attached to HR 386 admitted, “In practice, these use taxes are seldom paid.”

Estimated e-sales tax revenue would be small by government budget standards — $52.2 million for the state and $36.4 million for local governments – spread over fiscal years 2013 — 2015.  During the same period the fiscal note estimated that the state would lose $81.1 million and local governments would lose $56.8 million because of sales tax holidays for school supplies.

During Tuesday morning’s hearing Sen. Steve Henson asked House Majority Leader Larry O’Neal “why it took us so long to get here … really, why the last five days or so we’ve got a major tax bill for us to try to evaluate and do the best for Georgians.”

“There’s not one silver bullet as to why,” O’Neal said.  “I will assure you it’s not intentional to be done in any way to be deceptive to anybody or to hurry it by anybody for any reason.  If it were, it would be all new propositions.”  He added, “It’s finally time now to not let perfect get in the way of real, real good.  That’s why we’re dealing with it now, in my opinion.”

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