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Tax reform targets online sales

Legislative update

POSTED: May 17, 2012 6:00 p.m.

Ed: Hey, Susie. What brings you to the shopping mall today?

Susie: Oh, just out buying summer clothes for the kids. Some of my friends do all of their retail shopping online so that they don’t have to pay state sales tax, but I like to try and support the local businesses that employ local people.

Ed: Good for you, Susie. Hey, you know that the Georgia State Legislature passed tax reform this year that will require businesses that sell online to charge state sales tax now?

Susie: Well, none of us like new taxes, but I’ve always felt it was unfair for local businesses to have to collect sales tax but some company out of state that sells online not to have to collect it.

Ed: You’re exactly right, Susie. It is unfair. That’s why they call this e-fairness. And while some people call it a new tax, it’s actually a tax that should have been charged all along but wasn’t. The question has really been who was responsible for remitting the tax to the state.

Susie: Well, at least it levels the playing field and eliminates the competitive disadvantage for Georgia businesses. After all, when more people are buying from Georgia’s businesses, more jobs will need to be created.

Ed: That’s what House Bill 386, the tax reform bill, is all about — creating jobs.

Susie: So will everything that’s sold on the internet be subject to sales tax now?

Ed: No — only if a company has a nexus in Georgia and if they meet certain gross-sales figures.

Susie: What’s a nexus?

Ed: A nexus means that they have a physical or affiliate presence in Georgia. For instance, if the company selling the online product has a warehouse in Georgia then they will have to charge sales tax. Or if the product is being sold on Amazon.com and Amazon.com has a warehouse in Georgia, then sales tax has to be paid on the product.

Susie: What about small companies in Georgia selling direct on the internet?

Ed: Technically, if they are located in Georgia, they have a nexus here and will have to pay sales tax on their products sold if their gross sales exceed $50,000 per year.

Susie: It’s good to know that Georgia is ensuring local businesses stay competitive in a growing technology-driven business world where more and more goods are sold in cyber-markets. What else is included in this tax reform to ensure jobs are created in Georgia?

Ed: Well, your husband works down at the carpet factory, doesn’t he?

Susie: He sure does. And you know how tough that business has been over the past few years.

Ed: It certainly has been. And the Georgia Legislature recognizes that. That’s why they included the sales tax on energy for manufacturers to be phased out over the next four years as part of the tax-reform package.

Susie: My husband sure will be glad to hear that. His company has been threatening to pick up and move to another state because of the energy tax, and we certainly don’t want that to happen.

Ed: No, we don’t. Before this tax-reform legislation was passed, Georgia was one of only 10 states that taxed energy used in manufacturing. This created a barrier for our economic-development folks to try and attract manufacturing to our state and caused existing companies like where your husband works to threaten to leave.

Susie: Sounds like this tax-reform legislation will help Georgia attract more manufacturing companies.

Ed: It certainly will. In fact, Caterpillar announced earlier this year that it is planning to build in the Athens area, creating more than 1,400 jobs for Georgians.

Susie: Wow! This tax-reform legislation really is about creating more jobs for Georgians.

Ed: It most certainly is!

Susie: Ed, I have to ask you one more thing before I go.

Ed: Sure, Susie. What is it?

Susie: Why are you sitting on that horse?

Ed: I can’t get it to do anything.

Susie: I think you have to put a quarter in to get it to work, Ed.

Carter can be reached at Coverdell Legislative Office Building Room 301-A, Atlanta, GA 30334. His Capitol office number is 404-656-5109.

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