Today’s Courier Herald Column:
Georgia and Arizona do not share many obvious similarities. There’s a distinct difference in climate and humidity. You would be hard pressed to find Georgia pines or rolling hills of red clay in Phoenix. The upside for the desert dwellers is that they probably aren’t having the annual battle between pollen and their sinuses.
Politically, however, the two states that are a country apart are starting to look fairly similar. They are bright red Republican bastions who don’t care much for the current politics and policies coming from Washington D.C. Arizona’s immigration reform laws were the template for Georgia’s HB 87 from last year. We even have our share of elected officials who bitterly cling to birtherism.
Arizona’s failure this week to extend sales taxes to purchases made online will likely be examined closely by Georgia leaders, who have been eyeing ways to close the loophole that allows those who buy goods from retailers such as Amazon.com to evade sales tax collection. Georgia law currently requires residents to remit use taxes equivalent to sales taxes on these purchases. Without an effective reporting or collection mechanism, however, the tax usually goes unpaid.
Arizona’s Senate rejected their bill on a vote of 20-8. It was specifically designed to force sales taxes to be collected by Amazon and remitted to the Arizona treasury. Despite Amazon having subsidiaries that operate three fulfillment centers in Arizona, those do not qualify as Amazon having a physical presence under state law. Thus, Arizona is not required to collect sales taxes on sales to residents, despite having an infrastructure in place within the state.
Lawmakers across the country are battling the same issue. Online sales are growing as a percentage of total consumer purchases, but remain largely exempt from state and local sales taxes. Meanwhile, sales taxes are the one form of taxation that voters seem to continue to tolerate, with Georgia’s proliferation of HOST, MOST, E-SPLOST, and T-SPLOST taxes demonstrating the expanding importance of sales taxes.
As these taxes become the primary vehicle to fund local and regional projects, the discrepancy between prices of local retailers and online merchants continues to grow. Should the Atlanta region pass the proposed T-SPLOST transit tax this summer, sales taxes within the city of Atlanta will be at 9%. This will represent a significant incentive to shop for major purchases online, and an equal disincentive to shop at local merchants.
Those local merchants are the ones who invest in the community. They produce local jobs and remit not only sales taxes but also property and income taxes. They are also more likely to have a direct relationship with a state legislator who is feeling the pressure to begin collecting these taxes that are already legally due.
Consumers, however, see the collection as a new tax, and are letting legislators who advocate for mandatory collections hear that as such. Complicating matters, the same voter who advocates for a national sales tax system such as the FairTax is equally likely to have identified with a movement that claims to be Taxed Enough Already.
Georgia lawmakers were openly discussing a measure similar to Arizona’s at the beginning of the legislative session. While no standalone legislation requiring internet sales tax collection passed before last week’s “crossover day”, it is always possible that such a requirement could pop up as language within a bill that will pass both the House & Senate this year. Possible, but not probable.
While most legislators know that a 9% dis-incentive for businesses to invest locally cannot survive, they are also keenly aware of an anti-incumbent mood within the electorate. This is not only an election year, but a year when legislators will run in newly drawn districts. Many will be asking new voters to be voting for them for the first time. They are not keen on the idea of their first impression with these new voters to be that of trying to explain that collection of internet sales taxes isn’t a new tax, just a change in the collection system.
No, these are the discussions that are usually had in non-election years. As such, the Arizona failure of internet sales tax collection is likely a good indicator of the idea’s fate in Georgia this year. Legislators are much more interested in the regional T-SPLOST being enacted first. Collecting that extra penny on internet sales will likely wait until next year.