Your state Capitol is about to become the scene of a collision of giants, with Amazon.com on one side, and an army of brick-and-mortar retailers on the other, including Home Depot and Walmart.
The referee, oddly enough, is likely to be a Washington activist you’ve never heard of -– but whose very name can strike fear in the hearts of Republican state lawmakers. And loathing, too.
Two Mondays ago, Grover Norquist, president of Americans for Tax Reform, appeared in Atlanta before a group of conservative activists and lobbyists. His group presents pledges to Republican candidates across the country, demanding that they promise never to raise taxes. Ever.
On this day in Atlanta, Norquist refined his definition of what a tax increase actually is. If a government expands its tax collection system, and takes in more cash as a result, then that’s a tax increase. It is a novel interpretation subject to some examination -– Ronald Reagan, for instance, often spoke of increasing tax revenue by lowering taxes.
Still, Norquist’s extended definition raced through the Capitol like bad news, which, to many, it was. As have other states during these hard times, Georgia has hired more auditors for the Department of Revenue to target tax scofflaws.
But Norquist doesn’t deal in small change. After that speech, Norquist had a one-hour sit-down with Gov. Nathan Deal, who days earlier had announced that he was ready to go after the sales taxes that ought to accompany the purchases Georgians make over the Internet.
Not a tax increase, Deal’s people insisted. “It’s current law that all retail sales are supposed to pay a sales tax,” said Deal spokesman Brian Robinson. “It’s about collecting taxes that some outlets aren’t paying when they are supposed to.”
“E-Fairness” is the shorthand phrase. The Georgia Retail Association estimates that uncollected sales tax from every Internet sale to a Georgia resident might hover in the range of $500 million a year.
Internet sales also constitute a philosophical loophole that Republicans in the Legislature can’t ignore. Their long-term goal is to shift state government away from its reliance on property and income taxes, and toward consumption taxes. A foolish and inequitable thing to do if you can’t tap the fastest-growing area of retail sales.
But for now, state lawmakers are content to limit themselves to online’s biggest dog: Amazon.com, whose sales in Georgia might equate to $20 million in new tax revenue each year.
Behind the push are the state’s on-the-ground retailers, large and small. Carrying the most clout at the Capitol is Georgia-born Home Depot, second largest retailer in the nation and the supplier of thousands of jobs in the state. “All the large retailers are engaged. You name it, they’re involved in it,” said Rick McAllister, president of Georgia Retail Association.
The argument: Brick-and-mortar retailers in Georgia are being placed at a 6 percent or 7 percent disadvantage in the middle of a recession. “It’s a tax that’s due. Some of us have to collect it, others don’t,” McAllister said.
Taxing the Internet is a complicated chore. According to current federal law, a company is obliged to pay a sales tax only if it has an actual presence in that state – a “physical nexus.” Amazon.com has no facility in Georgia.
A bill in the works will attempt to tax Amazon.com’s advertisers – “affiliates” that have a physical presence in the state, said state Rep. Matt Ramsey, R-Peachtree City, who is drawing up the measure.
He has small shop owners in Fayette County who complain that they now serve as showrooms for their Internet competitors. Shoppers will come to their stores to get a feel for the item – a grill, a drill, a toaster – and then place their order, via their smart phones, with an Internet store for the tax-free discount.
“That’s just not fair to me. I think that is tantamount to corporate welfare,” Ramsey said. The lawmaker said the bill will include an offset so that the state posts no revenue gain from the bill. Perhaps, Ramsey said, the state will reinstate those sales tax holidays that disappeared at the start of the recession.
Kelly Cobb, an ATR spokesman, said the fact that Georgia would show no revenue increase was encouraging, but that Norquist is still likely to condemn the bill as poor policy — an attempt to expand taxation to an area now placed off limits by federal law.
Americans for Tax Reform, by the way, doesn’t reveal the sources of its funding. Lawmakers around the Capitol remember that Norquist opposed a 2003 effort by Gov. Sonny Perdue to raise the state sales tax on tobacco products. Only several years later was it revealed that tobacco companies were among ATR’s major underwriters during that period.
- By Jim Galloway, Political Insider