Changes to the Georgia Sales Tax Policy in 2012-2013 will help recover millions of dollars lost from the state’s inefficient tax collection of e-commerce and out-of-state sellers.
Bill Nemeth, partner at Tax Audit Guardian, explains the changes to the Georgia Sales Tax Policy for 2012-2013 as described below.
Current Georgia Law
The current Georgia law states that Georgia residents who sell goods are required to collect sales tax on products they ship to residents of Georgia. They are NOT required to collect sales tax on products they sell to residents or businesses in other states unless they have a nexus (physical presence) in the other state.
If they have a nexus in the other state, they may have a requirement to collect sales tax for that state.
The Georgia House Bill 386 passed by the Georgia Legislature in 2012 strengthened the collection of sales tax to residents of Georgia if the seller in another state sells goods to Georgia Residents – The change centered around the Out-Of-State seller having a NEXUS (Physical presence) in Georgia when selling to Georgia Residents..
The Bill is primarily concerned with collecting more of the Georgia sales tax being lost today when Sellers in other states sell goods to Georgia Residents.
Tax E-commerce Sales
An estimated $3.4 trillion worth of retail and wholesale transactions, or 17 percent of all U.S. shipments and sales, were conducted over the Internet in 2009.
Under federal law, out-of-state retailers are not required to collect taxes on these purchases unless they have a physical presence in the state. In practice, this means that a Best Buy or Target is required to collect taxes from online purchases, whereas an Amazon or EBay is not. Georgians are technically required to report these taxes (as “use tax”) on their annual tax forms, but few actually do. As a result, lost revenue is significant— Georgia will lose more than $400 million in 2012 due to its inability to tax e-commerce.
Additionally, the loophole puts local brick-and-mortar businesses at a disadvantage—the Georgia Retail Association estimates online retailers offer pricing that is 7 percent lower since the tax is not included.
In response, many states have begun implementing controversial “Amazon laws” that allow them to collect sales tax on certain online purchases. HB 386 would collect taxes on less than one-tenth of all online sales made in Georgia, specifically those made through online businesses that have some form of physical presence (technically known as “nexus”) in the state. As described in the Georgia Budget and Policy Institute’s (GBPI) analysis of HB 993, taxing online sales is good tax policy because it levels the playing field with physical retailers and takes a positive first step toward collecting hundreds of millions in lost revenue.
For more information contact Bill Nemeth at: [email protected]