Georgia’s online shoppers — often used to buying tax-free at sites such as Amazon.com — aren’t likely to notice a difference on New Year’s Day.
But behind the scenes, the tug-of-war between the state and online sellers is heating up.
Georgia, in an attempt to collect state and local sales taxes from online retailers that weren’t required to make shoppers pay, has expanded the definition of who must collect. Part of a new law goes into effect Jan. 1 and will ensnare online stores that don’t have a store or a warehouse in the state, but use ads on Georgia-based websites as a gateway to their own sites.
Sellers that have offices, stores or employees in the state are already required to collect sales tax in Georgia. It’s a fairness issue that has riled those retailers.
The new law is intended to get sites such as Amazon to collect taxes, but even the head of a lobbying group for Georgia retailers doesn’t expect it to work.
“I’m not very optimistic,” said Rick McAllister, president and CEO of the Georgia Retail Association.
In some states, Amazon has stopped running its click-through ads on websites that would trigger the need to collect sales tax. In others, it has fought the laws. In some cases, the company has reached agreements with states to collect sales tax in the future.
No one at Amazon returned phone calls or emails seeking comment about the company’s plans in Georgia, and Georgia tax commissioner Douglas MacGinnitie said he was not able to discuss whether Amazon had been in contact with the state.
The Georgia Retail Association pushed for the new law, which also expanded the state’s definition of a “physical presence” to include companies that use warehouses or offices in the state, whether they own them or not.
There is not yet any indication that online retailers began collecting taxes from their customers since that piece of the law went into effect in October, said Ken Heaghney, Georgia’s fiscal economist. MacGinnitie said it was too early to tell whether any online retailers were paying new taxes to the state.
The new state law has already led Overstock.com to end its relationships with “affiliates,” the Georgia-based websites carrying its click-through ads, said Jonathan Johnson, Overstock’s president. In other states, the impact of canceling relationships has been minimal for the company.
“We found it hasn’t hurt our business,” Johnson said.
Instead, the middlemen could take the economic hit.
Cartera Commerce, a Boston company with about 100 Atlanta employees, doesn’t sell products, but it partners with online retailers to operate bank and airline loyalty programs. Some of those retailers who do not have another physical tie to Georgia are likely to end their relationships with Cartera to avoid collecting sales tax under the law, founder and Chairman Dave Andre said.
Andre expects Cartera to lose $1 million or $2 million in revenue if the law goes forward as planned. Andre said Georgia will continue not to receive taxes from online retailers such as Amazon.
“Everybody knows this law is not going to accomplish anything,” Andre said. “We’re sort of a pawn in this battle. …We’ve got to figure out what to do about it.”
Most of the Georgia websites that would stand to lose advertising business in response to the law are local coupon sites or bloggers, said Rebecca Madigan, the executive director of the Performance Marketing Association, a trade association for those companies.
McAllister, of the Georgia Retail Association, said he has little sympathy for bloggers who lose some advertising revenue. At brick-and-mortar retailers and websites that have to charge sales tax in Georgia, thousands of jobs are on the line.
“It’s not even comparable,” McAllister said. “It continues to be the most unfair competitive situation I’ve ever seen.”
The fairness issue isn’t lost on shoppers.
Brian Hood, who lives in Brookhaven, doesn’t do much shopping online, but said he thinks Amazon and other online retailers should collect sales tax.
So does Dougie Coffed, a Brookhaven resident who shops at Amazon more for its convenience and low prices than for the tax savings, which are often minimal. But Coffed said if he knew he could save taxes on a big-ticket item by simply clicking to another website, he would likely do it. In Georgia, as of Jan. 1, sales tax ranges from 6 percent to 8 percent, depending on the county.
As online sales increase in popularity — they were up 15.2 percent over last year between Oct. 29 and Dec. 25, according to the Chase Holiday Pulse — the question of who has to collect sales tax becomes more important to the state’s coffers.
A 2009 University of Tennessee estimate projected in 2012, Georgia would lose as much as $455.5 million in uncollected sales tax from online purchases. Heaghney said the state would add $16 million in revenue on an annual basis if it was able to collect sales tax from online stores with affiliate relationships, but he doesn’t expect anything to change.
“Those who do not currently collect, in the short term, I expect them not to collect,” he said. “What we’ve seen in most instances is they terminate their affiliate relationships.”
Eight other states have enacted similar laws — something that could push Congress to pass a law requiring online retailers to collect sales tax in all states. Heaghney said Georgia’s law will increase pressure nationally.
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