The House bill that doesn’t contain a tax on Internet sales

Phone calls have been rolling in from anti-tax enthusiasts, pointing to a bill that had suddenly ballooned from a single page to dozens, then raced through the House on Friday.

H.B. 1221 was chockfull of new definitions that would apply to sales tax collection. There was great wondering over whether this might be a stealthy effort to impose a sales tax on items purchased through the Internet.

On Saturday, my AJC colleague Aaron Gould Sheinin tracked down state Rep. Larry O’Neal, chairman of the House Ways and Means Committee.

The Bonaire lawmaker swears the bill contains no tax increase – but concedes that the massive tax reform package is “real easy to misunderstand.”

“There’s not a single new tax in it at all. There is no tax establishment of any kind. It is a result of about a nine-year, sort of national collaboration of states that have been trying to conform all of their sales tax codes together — and it has to do with a very technical aspect of the tax law,” O’Neal said.

What HB 1221 is, O’Neal said, is an ahead-of-the-curve effort to protect retailers – in case the Fair Tax or some other universal consumption tax becomes the law of the land.

The process is known as “nexus,” which is a term of art dealing with the question of whether an out-of-state retailer has a physical presence in another state. Before the Internet, it was easy to determine if a business, say Sears, had a physical location in the state.

But when it comes to Internet sales, if a person in Alpharetta buys something from a specialty dealer in Alaska over the Internet – does that give the business a physical presence in Georgia?

O’Neal’s bill is aimed at answering that question, by providing the Alaskan retailer “nexus” in Georgia.

“Long story short, if nexus is established against a retail seller, then there can be a huge tax assessment against anybody,” O’Neal said Saturday. “So, businesses have become very concerned over the last five years even though they have this [prohibition] against Internet taxes.”

Here’s an explanation of the same from Travis Fain of the Macon Telegraph:

[The bill represents] a new program that allows catalog and Internet sales companies to voluntarily start paying sales taxes on purchases shipped into Georgia. This program, included in House Bill 1221, could raise somewhere in the neighborhood of $30 million a year, House Ways and Means Chairman Larry O’Neal said Tuesday. Many of these businesses enjoy a moratorium on sales taxes for Internet purchases, but there are some concerns in the industry over just how far that moratorium extends, and whether they could eventually face prosecution over unpaid sales taxes, O’Neal said.

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37 comments Add your comment

zeke

March 28th, 2010
12:02 pm

So what does that political legaleeze double speak actually meam? IF SOMEONE IN ATLANTA BUYS SOMEHING FROM A SELLER ANYWHERE IN THE USA, THEY SHOULD PAY THE SALES TAX AS LEVIED IN ATLANTA! Otherwise, Atlanta retailers will be unfairly competitivly penalized by having to charge a higher total price than the other retailer! NOT CONSTITUTIONAL and IN VIOLATION OF THE FAIR TRADE ACT!

formermerchant

March 28th, 2010
12:15 pm

A business on the internet could have advantages over a retail establishment because of lower overhead. We should not extend this advantage to sales tax. The sales tax should be levied on all sales conducted in each state/municipality. We need to stop selective taxation!

The Carnivore

March 28th, 2010
12:44 pm

Obviously sales taxes are illegal in conjunction with income taxes. We need to have one or the other, not both. I am glad to see that rational minds are prevailing for once, and that the Internet remains tax-free.

rj

March 28th, 2010
1:00 pm

There is a two fold issue here. First there is an un level playing field when the retailer can ship/sell to a Georgia resident and not have to collect sales taxes as compared to the retailer who pays rent/owns a building/pays taxes and employs Georgians by having a physical location. Secondly, with such a gaping hole in the Georgia tax collections and resulting budget issues why not institute a sales tax? While there are different tax rates in different counties the State of Georgia certainly should have the ability to collect say a 5% tax on all goods and remit via the zip code of the purchaser to the city/county of origin. Where is the legislative ability to think on this? Why are they tuning their backs on something that could alleviate two issues at the same time? Where is the leadership?

LH

March 28th, 2010
1:19 pm

What is this about sales taxes being “fair” or “unlevel”? A government collects taxes to provide services to its citizens. Taxes are not an economic tool nor a method for government to meddle in the free market to level the playing field for its businesses. A business with a physical presence in a locality receives services from that locality (police, fire, legal, social, etc. etc.) and ought to support that locality. If sales are from an out of locality business that does not receive services, it should not pay taxes. If I travel out of state to purchase something and bring it back, should I have to pay taxes on that?

Businesses that do pay taxes are not at an unfair advantage because they receive services for their taxes while the out of locality does not. If a business finds that they are pressured on price by a distant competitor should look at their business model and see what they can do on cutting costs, product features, advertising or other basic business model areas (& maybe go get an MBA book or two).

Anyone who is advocating taxing out of locality businesses, be VERY CAREFUL about what you ask for. France sued Yahoo and won (in their courts) for violating their laws. Do you really, really want to say that any locality can enforce their own laws against an out of locality business?

Used to be Disgusted

March 28th, 2010
1:41 pm

Why do republicans think that the answer to every problem is a tax cut, especially a tax cut for the wealthy?

Why do they hate America?

Michelle

March 28th, 2010
1:48 pm

Why would anyone think that “presence” on the internet constitutes physical presence, or nexus, under the law. It does not. In the same way that simply receiveing a catalog in the mail does not establish nexus for catalog sales, neither should internet access consitute presence.
If the business is not present in your physical jurisdiction, the government should not be allowed to tax the transaction!

KH

March 28th, 2010
1:54 pm

If you want to get technical, any items purchased from out of state and shipped into Georgia are subject to Georgia’s Use Tax (to be paid by the purchaser), which is the same rate as the sales tax. The problem is that it is virtually impossible to collect use tax from individual taxpayers (unless you want the Department of Revenue auditing your personal out of state purchases….I didn’t think so). This bill is attempting to redefine nexus so that an internet company selling to Georgia residents would be required to register and Collect and remit Georgia Sales Tax. This should actually help Georgia based businesses because you could no longer purchase from an out of state vendor without having Georgia Sales Tax added to your invoice.

Keith

March 28th, 2010
2:04 pm

I’m hearing the bigger problem is changes to SB 52 (senate) – that this bill was modified to include collection of sales taxes on Internet purchases.

RGB

March 28th, 2010
2:11 pm

Why do followers of the Democrat party think that the answer to every problem is a tax increase, a czar, a new regulation, disparagement of private enterprise, or persecution of people of faith?

Why do they hate America?

Keep it Real

March 28th, 2010
2:41 pm

@RGB why woudl you mention the Democrats when it is the Republicans who has the majority in the state of Georgia? Why did you let you emotions control you response?

The state of Georgia needs revenue and if our residents are purchasing items out of this state then we need to collect the sale taxes.

cv

March 28th, 2010
2:42 pm

Larry O’neals bill appears quite simple–although written in lawyer mumbo jumbo and explained in more mumbo jumbo, as are most new tax laws.: If his bill becomes law Georgia residents will be paying sales tax on everything bought on the Internet. You will pay sales tax on Amazon purchases and probably ebay purchases if his definition of nexus is stretched to the logical limits, which you can bet will happen. So this bill will result in new taxes. It taxes transactions that were never taxed before. Why do these legislator-lawyers think we are all dolts?

cv

March 28th, 2010
2:50 pm

By the way, I am not against paying sales tax on internet purchases. I believe it is fair and reasonable. I am against the hypocrisy of our Republican leaders who know this state must raise more revenue, and realize the inequity of the current sales tax structure favoring internet sales, but try to raise taxes in underhanded and devious ways, while proclaiming piously and absurdly that they are not raising taxes.

Bobby

March 28th, 2010
4:06 pm

I buy off the internet all the time after comparing prices in local stores including the tax. Quite often if the internet store doesn’t charge I save money so I buy from them. Think amazon.com

Used to be Disgusted

March 28th, 2010
4:18 pm

RGB,

You sound bitter and frustrated. Is this the reason that you hate America?

Tom

March 28th, 2010
4:40 pm

When purchasing online, I compare local prices (including tax) with online prices (including shipping) and see what turns out best – that is if the purchase is worth the time and effort for the comparison. The field is pretty level when all is compared – so there’s not a real advantage for out of state merchants, unless shipping is ‘free’.
It would be much easier if there was a national sales tax on internet purchases – let’s say – only for illustration – 4%. All online purchases get hit with that tax, and it is remitted to the buyer’s local tax district (somehow…). The problem with the current situation is that there are thousands of different sales tax rules and regulations making a simplified system very difficult. (an understatement!)

BTW – when it comes down to it, I really don’t like taxing online purchases, but probably that won’t matter much in the future anyway…it’s gonna happen. It would be nice if we could keep it simple!

jcwhitingjr

March 28th, 2010
5:11 pm

We the people are over taxed already. There should be either a sales tax or an income tax, not both. We the people are getting screwed out of our hard earned money by our elected officials because they do not care about us or our wishes, they care only about that which lines their pockets with money!

Ryan

March 28th, 2010
5:34 pm

The Supreme Court case Quill v. North Dakota ruled that remote retailers with no physical presence in a state are not required to collect sales tax in that state. Until the US Congress passes a law stating otherwise this effort by the Georgia House will be illegal and unenforceable.

Michelle

March 28th, 2010
6:07 pm

You are exactly right. We have some people in our society who want to tax absolutely everything whether the law allows them or not.

jackie baines

March 28th, 2010
7:16 pm

IF IT WALKS LIKE A DUCK AND QUACKS LIKE A DUCK, I SEE A DUCK. IF OUR LEGISLATORS TURN A ONE PAGE TAX BILL INTO A 12 PAGE TAX BILL AND THEN TRY TO EXPLAIN IT WITH MUMBO JUMBO, AND SAY IT IS NOT A TAX, LOOK OUT. TAXPAYERS WILL BE PAYING FOR THIS.DO NOT BELIEVE THE LEGISLATORS. FOR EXAMPLE, ASK YOUR LEGISLATOR HOW MUCH OF THE MONEY YOU OR YOUR FRIENDS PAY FOR SPECIALTY TAGS GOES TO THE ACTUAL CAUSE. NOWADAYS, THEY ARE STEALING THE MOST OF IT.

Don

March 28th, 2010
7:35 pm

“Obviously sales taxes are illegal in conjunction with income taxes”. ???? Obviously, you are beaming this in from some other dimension.

Pat

March 28th, 2010
7:44 pm

I am not an expert (unlike many of you) but I believe the purchaser is actually suppose to pay the tax. It is call the ” use tax” as in the “SALES AND USE” tax. However no one that I know actually pays the use tax.It is a hugh advantage to internet sellers and should be collected. If the large retailers can charge frequent purchasers more that new visitors to their site they can certainly collect the sales tax.

They know where you live!!!

Bigbox Bill

March 28th, 2010
8:16 pm

I like buying gas just over the state lines when possible to keep Sonny from getting that sales tax money too. Since he likes to furlough teachers so much, I like to level the playing field some. It is my money and I spend it where I want to.

fairness for all

March 28th, 2010
8:27 pm

georgia businesses and the state of georgia lose on both sides of the coin by continuing to allow out of state businesses to sell in georgia on a tax advantaged basis. there is no legitimate argument to continue to punish georgia businesses in this fashion. everyone should be for fair and equal taxation on all persons living in this state and country. stop exempting people from paying taxes because their only income comes from the taxes paid by others. Every person in this country and in this state should pay their fair share of tax.

dewey cheatham

March 28th, 2010
8:36 pm

Just another way to fleece Georgians. Let’s vote out the whole General Assembly and start over…with all Independents.

Waldo313

March 28th, 2010
8:44 pm

I like internet sales just the way they are.

We get taxed enough.

The more you give them, the more they spend.

RGB

March 28th, 2010
9:24 pm

I dislike people who are destroying America.

Are you so uninformed that you are not aware that 4 out of 5 Americans believe that our economic system could collapse?

Are you unaware that Warren Buffett and even Lowe’s Stores can borrow at interest rates more favorable than the U.S. government? That investors trust them more than they do the federal government?

Are you so uncaring that the unemployment rate is high and that Atlanta–and the nation–is facing record home foreclosures?

Are you unconcerned about the government debt that closes businesses, prevents the start-up of others, and puts future generations in a box that will make their standard of living lower than has been seen in many generations?

Are you unconcerned that 3 million retirees will lose their private prescription drug coverage because of the Democrat health care legislation that was just passed? That AT&T will take a $1billion charge against earnings because of the bill? That the bill will cost Caterpillar $100 million this year and John Deere $150 million? That Medtronic will fire 1,000 workers because of the legislation? How many more people must lose their jobs before you show the hint of a concern?

No, I don’t hate America.

But I do hate what is being done to America.

Taxes Now

March 28th, 2010
9:47 pm

The state of georgia is broke and needs to raise taxes way up to pay for all these services and salaries! I’m worried about getting furlough days with my state job, which shouldn’t happen when they can just raise taxes to keep our salaries the same. There are plenty of fatcats in georgia who can pay lot more tax money than they are now. Cutting state salaries and benefits should be the last resort.

rooster

March 28th, 2010
9:51 pm

Online retailers are parasites, pure and simple. They don’t show product. They just ship goods that the consumer has seen, touched and in many cases had explained and demonstrated to him at a brick and mortar store. They undercut brick and mortar stores because they don’t have the same expenses to meet, and they get the additional benefit of selling tax-free. Insects!

mike

March 28th, 2010
10:32 pm

I assume Oneal is a republican? Maybe he should find some ways and means of helping the education system in this state instead of worrying about where citizens of Georgia purchase their internet products. Georgia has a problem when it comes to a lot of online purchases. There are no markets or retailers here in this state. Other than a small car company near Columbus, no one wants to come here.

Used to be Disgusted

March 28th, 2010
10:36 pm

RGB,

You sound like one of those America-haters who was just fine as long as people you supported were in charge doing things like invading countries based on trumped-up evidence and mismanaging the economy to bring us to the point of collapse. But as soon as people with other ideas are calling the shots, you want to take your flag and complain.

Instead of being an obstacle to progress, why don’t you try to be a patriot and support the President? That’s what a person who loves his country would do. Otherwise, you hate America.

I’m so sorry you have to go through life with so many intellectual and emotional limitations, but that does not excuse your pathological hatred of our country. Have a nice evening!

Time for the fair tax

March 29th, 2010
12:13 am

Eliminate all loopholes… It’s time for the fair tax. No loopholes, no exemptions, no IRS.

Carnivore 69

March 29th, 2010
12:24 am

Unbelievable how some of you think government is an end in itself. That taxes should be raised to pay for bureaucracy. That government is even a career at all.

Maybe you should look at it differently. Take the income the government gets, and adjust the level of service accordingly. If income is low, then lower services. If income is high, then raise services. But don’t mess with taxes because of a supposed “shortfall”. “Mismanagement of resources” is the phrase you need to use.

I worked for a government for several years, and what I learned is that it is a parking lot for the permanently lazy and unambitious. There are exceptions for sure (teachers, police, etc), but the world can and does function well with a lot less government involvement than you think is necessary.

Michael

March 29th, 2010
12:44 am

Despite how much I like buying stuff from places like Amazon without any taxes, it’s really not fair to stores with physical presences to not tax such places. Apple, Best Buy, Target, JCPenney, Walmart, etc. all get standard taxes because they have actual stores. But Amazon, Buy.com, iTunes, etc. don’t because they have no physical presence. Figuring out a fair way to levy taxes on these purchases would level the playing field and help shore up some budget holes.

A Realist

March 29th, 2010
8:31 am

Ah, a new book…….”The Rise And Fall Of The American Empire”. I wonder how much sales tax revenue this book will bring in for the “United Socialist State :) Of America?

Jeff@50

March 29th, 2010
10:29 am

Judging by the comments above, this concept will be lost on most of you, but when you buy products on the Internet, you are shipping your money OUT of your local economy. Don’t complain about how high unemployment is if you’re buying everything from Amazon! Local retailers hire local people, buy local goods and services from other local merchants, pay local taxes to help support roads, education, public safety, water and sewer, and other public services we ALL depend on. Online retailers suck money out of your community. A local retail store returns about $68 out of every $100 to the local economy, and online retailers return $0. Make your choices accordingly.

ugaaccountant

March 29th, 2010
11:52 am

“A new book…….”The Rise And Fall Of The American Empire”.” – I don’t want to speculate on the exact date this book will be published, but this appears to be a certainty within the lifetimes of many current citizens.

“Buying gas out of state to punish Sonny Purdue” – What are you talking about? Sonny has a driver that takes him wherever he needs to go, and a police escort if he needs one. The people you hurt by paying gas taxes out of state are the average Georgians commuting to and from work everyday.

Same for buying online to avoid the tax. You’re only hurting the local economy by doing so. I understand sometimes you need to in order to locate the good you want to purchase, but give some serious thought to supporting local employers, you never know whose jobs you’re putting at risk in addition to the lost tax revenue. Plus any online retailer charges you for shipping, whether included in the price of the product or on a separate line. You’re living in fantasy land if you think you’re really getting free shipping.