“Why would I pay a sales tax to Georgia?” she wondered. “I mean, I know my computer is in Georgia, but that company ... they’re elsewhere. Would I pay a sales tax to an online community? The rules get really funny.”
Hayes is one of millions of online shoppers who should be paying state sales tax on their purchases, but often aren’t. That is expected to change later this year.
Georgia joined other states this week in passing a law aimed at collecting billions in lost sales tax revenue from online retailers. The Legislature passed the measure as part of a comprehensive overhaul of the state’s tax code. The bill now awaits Gov. Nathan Deal’s signature. His office has suggested he favors the idea.
The law would not technically put a new requirement on consumers. Online shoppers who do not pay state sales tax are supposed to file it on their income tax returns. The legislation would require online retailers to collect the tax and remit it to the state.
It was among the recommendations set forth by the Special Council on Tax Reform and Fairness for Georgians published in January 2011. According to the report, online sales are a growing part of the state’s economy, but the estimated revenue loss to Georgia from the inability to collect sales tax on those transactions is $410 million in 2012 alone.
The so-called Amazon law, named for the largest e-retailer potentially affected, is part of a tax reform bill passed by the Legislature this week. The statute covers retailers without a physical presence in the state. If signed by the governor, the section referring to Internet sales tax would take effect Oct. 1.
New York was the first state to pass such a law in 2008, and nine more states have done so since then. Besides Georgia, they include North Carolina, Rhode Island, Illinois, Arkansas, Connecticut, Vermont, California and Pennsylvania. Legislation was introduced or pending in several other states in recent months, including Kansas, Maryland, Louisiana and Mississippi.
State auditors predict the tax will generate more than $52 million for Georgia over the next three fiscal years. Proponents argue the tax is in the spirit of “e-fairness.”
“The reality is that brick-and-mortar stores have a responsibility of collecting sales tax from their customers at the point of sale,” said Rick McAllister, president of the Georgia Retail Association and a proponent of the tax. “With the evolution of the Internet, most of our members who have Internet sales collect tax on their sites, but there are some who don’t. It’s not a new tax. What we’re asking folks to do is collect the sales tax from their customers and remit it to the state of Georgia just like all the brick and mortar stores do.”
McAllister said all of his e-commerce members collect the tax, yet they must compete with retailers outside the state who may not collect it.
“This is really a collection issue, pure and simple,” he said. “It’s already owed by the customer. This levels the playing field for our members, who are doing the right thing.”
Amazon.com and Overstock.com have challenged the New York Law.
The National Conference of State Legislatures opposes such legislation at the state level and is lobbying for a federal law.
Georgia Revenue Commissioner Doug MacGinnitie has urged the state’s consumers to be proactive about paying sales tax on online purchases. During the last holiday season he reminded shoppers that when state sales tax is not charged, it becomes the purchaser’s responsibility to remit the tax on the purchase. Those who make online purchases without paying sales tax can pay using an online form on the department’s Web site.
MacGinnitie declined to comment on the law, since it has not yet been signed by Deal.
“We believe that more and more states will pass similar laws, as e-commerce becomes a bigger piece of the retail pie,” said Deal spokesman Brian Robinson. “It’s unfair to tax Georgia job creators but not their competition. Eventually, it will have to be taken up on the federal level.”
Even when the rule takes effect, Hayes said she doubts it will deter her from shopping on the Internet, since she’s mainly in it for convenience.
“If I wanted to save money, I’d probably just go to a bricks and mortar establishment,” she said. “I’m paying so it shows up at my doorstep. If there’s an extra surcharge, I probably won’t even notice that I should be upset about it.”