Originally created 09/23/05

Inventory tax affects Augusta

ATLANTA - When Robert Magbee looks at moving his contractor supply company into new markets, places like Augusta already have a strike against them.

He said that's because cities located near Georgia's borders feel the impact of the state's inventory tax since none of the neighboring states levies the charge on distributors and store owners.

When decision time comes, that will make a difference, said Mr. Magbee, who now owns two building supply wholesale centers in Georgia and one in Alabama.

"I would say that the state of Georgia is not going to get that location if we expand in those markets," he said. "The issue is about fairness compared to the surrounding states."

Mr. Magbee was one of several retailers, furniture distributors and small business owners who spoke to a House study committee Thursday. Many called for legislation to drop the state's inventory tax, a charge the majority of states don't collect.

The state levies the tax based on how much in unsold goods a business has in stock at the end of each year. Some items are not charged if a local government grants freeport exemptions on materials or manufactured products bound for another state.

The state collects about $150 million annually in inventory taxes, according to Kyle Hensel, a marketing and retailing instructor at Georgia Southern University.

That money, when returned back to the counties, provides less than 5 percent of education budgets in most areas of the state, he said.

"We're not talking about a major percentage of the budget," Mr. Hensel said.

Still, one county tax official cautioned House members to keep in mind the financial impact.

"If we do away with the inventory tax, what are we going to do in its place?" Rockdale County Tax Commissioner Dan Ray said. "A fair tax is like art; it's in the eye of the beholder."

Several years ago, the state waived inventory tax collections on automobile dealers and followed up with the same change last year for aircraft dealers.

"Obviously, there's hundreds of groups that want exemptions," said Clint Mueller, the legislative director for the Association County Commissioners of Georgia.


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