Is it a tax increase if you begin taxing something new? A number of pundits suggest the answer is “yes.” Grover Norquist, who was recently featured on 60 Minutes and has been making prominent appearances in Atlanta, believes that the subject of this post is, in fact, a tax increase. This is creating some sweat for legislators asked by Norquist’s organization, Americans for Tax Reform, to pledge that they will never raise taxes.
The Georgia House of Representatives will soon be voting on House Bill 993, which would create or enforce, depending on your viewpoint, a sales tax for Georgia residents on certain e-commerce transactions. Federal law currently permits such a tax to apply only to sellers who have some physical nexus to the jurisdiction applying the tax, and the Georgia legislation would, in part, be based on local affiliates’ relationships with the largest retailers.
Georgia Governor Nathan Deal is in favor of the measure, suggesting that it is simply the enforcement of sales tax collection that should already be taking place. Supporters also say the tax measure will not produce additional revenue for the State, but will instead be offset by reinstatement of tax-free shopping holidays.
The Georgia Retail Association estimates that uncollected sales tax from all Internet sales to Georgia residents amounts to about one-half billion dollars per year, and about $20 million of that comes from Amazon.com transactions alone. The specific transactions that are the subject of the House bill would bring in about $18 million per year to the Georgia Department of Revenue.
Traditional businesses that do not rely on e-commerce are throwing significant backing behind the proposal, with Atlanta-based Home Depot the most important proponent. Home Depot, in fact, already collects the tax in question on its Internet sales. Traditional retailers argue that they are operating from a serious disadvantage when e-commerce retailers do not charge the tax and can thus provide the lower prices consumers are increasingly seeking.
It is of note that, on a general tax policy basis, a move in favor of an Internet sales tax in Georgia would, in effect, represent a move toward consumption taxes and a retreat from what have historically been property- and income-based tax revenues. Federal legislation of a uniform Internet sales tax has gone nowhere for years. In the coming month, we will see if the current attempt in Georgia gains traction.