Georgia internet sales tax proposal clears big hurdle

The days of buying untaxed goods online in Georgia may be numbered.

The Georgia Senate Finance Committee on Wednesday overwhelmingly backed House Bill 61, which would require online retailers who make at least $250,000 or 200 sales a year in Georgia to either collect and remit to the state sales taxes on purchases or send "tax due" notices each year to customers who spend at least $500 on their site.

The same bill easily passed the Georgia House last year and now could be up for final passage in the Senate.

Its passage could mean an extra $500 million to $600 million a year in sales tax collections for the state and local governments. The bill's sponsor, House Ways and Means Chairman Jay Powell, R-Camilla, said the taxes are already owed, but many online retailers haven't collected them. Mega-retailer Amazon is among the exceptions, agreeing to start collecting Georgia taxes several years ago.

States across the country have been tackling the issue in recent years. But they have run up against a ruling the U.S. Supreme Court made more than 25 years ago saying governments can’t force retailers to collect and remit taxes unless they have a physical presence, such as a store, in a state.

The Supreme Court agreed recently to reconsider the issue using a law passed by South Dakota's Legislature for the express purpose of testing its legality.

The original ruling came before the internet sales boom. Now it is a major part of the retail landscape. For instance, online sales hit $108.2 billion this past holiday season, according to Adobe Analytics. Forecasters have predicted U.S. online retail sales could top $1 trillion a year in the next decade.

Powell said the state needs to have its law in place to begin collecting money if the Supreme Court rules in favor of internet sales taxes in the next six months to a year. Without it, state and local governments could lose out on hundreds of millions of dollars in collections.

NetChoice, a trade group that represents Chinese internet retail mammoth Alibaba, Overstock.com, eBay, PayPal and others, has asserted that such changes have the potential to hurt small businesses and that Georgia’s proposal raises privacy concerns.

Steve DelBianco, the executive director of NetChoice, did not attend Wednesday’s meeting, but he said during last year’s debate that forcing retailers to disclose sales would provide the government with information “about that individual’s health concerns, political leanings, sexual orientation, personal tastes and financial status.”

But Georgia lawmakers, some business groups and local government associations support the measure, saying it helps local stores that currently collect sales taxes on their goods and must compete against internet retailers who don’t.

“We have been talking to retailers all over the state,” said Joel Wiggins, a lobbyist with the Georgia Municipal Association. “They are feeling the effects of having to compete with remote sellers, and this is having a real impact.”

State Sen. Bill Heath, R-Bremen, a member of the Senate committee, voted against the bill after raising questions about how it would be enforced. But Heath made similar arguments to those voiced by supporters.

“I wholeheartedly think we should collect sales taxes on internet sales,” he said. “To not do that punishes our brick-and-mortar retail establishments that are employing Georgians and paying taxes here in the state.”

While the bill is a step or two away from becoming law, a possible hiccup in the legislative process was hinted at by state Sen. John Albers, R-Roswell, a member of the committee.

The bill stalled last year in the Senate after it was attached to legislation to lower the state's top income tax rate. That is still a priority for Albers and other senators, and the internet-tax measure could get caught up in the maneuvering on that issue again this session.

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