E-Fairness and the Sales Tax Holiday
As I continue our discussion of the features of this year’s tax reform bill, I want to take time today to discuss the changes to how you will now pay the sales and use taxes on goods bought online. We will then finish up this newsletter with a discussion on the reimplementation of the Sales Tax Holiday for back to school goods and energy efficient products.
Section 6-1 of HB 386 deals with who is required to collect and remit sales and use taxes on online purchases. The intent of this section is to ensure that Georgia businesses that employ our citizens and pay taxes are treated the same as out of state, online retailers. Some of you may assume that goods purchased over the internet are exempt from state and local taxes, at least that is what some online companies may have lead you to believe. The issue is not whether there is a tax liability, which there is, but rather who is responsible for remitting the tax to the state. Similar to store bought purchases where the buyer generally sees a line added for “Sales Tax,” officially the state revenue laws include a “Sales and Use Tax” where the term “use” refers to the obligation of the buyer to pay taxes on out of state purchases which are used in Georgia. The National Conference of State Legislators estimates that states will lose a combined $23.3 billion in FY2012 in uncollected use taxes. Prior to the passage of this important tax reform package, Georgia was estimated to lose $88.6 million over the next 3 years in uncollected state and local taxes.
In the end, Georgia will see substantial benefits from the collection of online sales tax. Additionally, the small brick and mortar companies in our communities will gain from the Marketplace Fairness Act. The current inclusion of sales and use taxes results in a competitive disadvantage for these companies. We must support the benefits our state and our communities receive when we collect a sales tax on products bought within our state lines. Businesses in our state employ Georgians, build safer communities, and contribute to our education system. Think about the difference you make when you buy locally – whether it’s at a Big-box chain store or a local boutique. Buying locally reaches far beyond simply collecting a sales tax; it gives us the tools to build our state. Collecting on taxes owed to us, such as online fees, is one of the most promising solutions that Georgia has to decrease the tax burden on our citizens and provide a modernized tax code. Ensuring that our local businesses are treated fairly is key to sound tax policy.
Section 6-2 in HB 386 reinstates the annual Sales Tax Holiday (STH), another area of tax reform we felt was important for hardworking Georgians. The STH is a great opportunity for families and individuals to make necessary back-to-school purchases for things like supplies and clothes or investments in technology such as personal computers and environmental investments that include household devises with special energy savings ratings. Reinstating the STH is a decision we felt would benefit each and every Georgian.
You may be surprised to know that this day is actually a substantial loss to the state in terms of earned revenue. On the STH, the estimated revenue loss is $32 to $45 million. Knowing this, you may ask yourself what the real benefit is to the state. It’s important to remember that gains aren’t always seen in the bottom line, but can be felt by increasing the quality of life for Georgians through helping them to get the most out of their hard earned money whenever possible. Despite the apparent loss to state revenue, STHs are of particular importance to us as legislators because they help to support you, our constituents, build up our communities and support growth in Georgia businesses. This year, families watching their budget carefully can once again feel a reprieve in their pocket books as the cost is lowered on necessities such as clothing and school supplies. STHs also promote consumption that is believed to be socially beneficial through the purchase of items like computers that promote computer literacy among children and adults, and energy or water efficient appliances and fixtures that promote conservation. Lastly, they boost the state’s economy (particularly in border counties) and tax revenues by encouraging residents of neighboring states to cross the border to shop during this three day weekend in July or August, during the “back to school” shopping season. The increased revenue from neighboring states comes from sales of fuel, purchases at restaurants, and stays at hotels for those who travel to Atlanta for “premium” shopping. As the southeast continues to become one of the most competitive regions for growing businesses and building communities, it is vital that we use tools such as the STH to support Georgia’s businesses, communities and hardworking citizens.
I am encouraged by the progress made this year on tax reform in Georgia, but I’m fully aware that our job is not done. We must strive to flatten our tax rates and make our tax code fairer and simpler. I welcome your thoughts and suggestions as to how we can create a fair tax system in Georgia, one where the burden is minimal and everyone pays a fair share and no more. It is an honor to serve you and to listen to your thoughts, concerns and hopes for our state’s future. I have no doubt that the smallest group of Georgians can be the largest voice at the State Capitol when an issue is of deep importance to them. I encourage you to use your voice and share your ideas with me on how we can create a better Georgia each and everyday.