Last year, the Georgia Legislature passed a bill – signed into law by Gov. Nathan Deal – that would require online-only retailers to begin collecting and remitting our state’s sales tax.
While some retailers are following the law, others refuse to do so and remain shielded by a federal Internet sales tax loophole.
A new study shows closing the online sales tax loophole will provide myriad benefits, according to economists Art Laffer and Donna Arduin, including:
• The potential to lower overall tax rates and fuel economic growth.
• A tax system with fewer loopholes, a larger base and lower rates for taxpayers.
• An increase in U.S. GDP of $563.2 billion.
• And creation of more than 1.5 million jobs, including more than 50,000 in Georgia, over the next 10 years.
Laffer’s findings support the efforts of a growing coalition of small-business owners, governors and free-market conservatives across the country who are urging the U.S. House of Representatives to act and to pass the Marketplace Fairness Act.
A Supreme Court ruling in 1992 exempted internet-only retailers from collecting and remitting sales taxes. In 1992, the task of collecting and remitting sales taxes from multiple jurisdictions was thought too cumbersome for fledgling remote businesses. Today, modern technology has rendered feasible the once seemingly difficult task.
According to Laffer and Arduin, states are suffering economic damage because of shrinking sales tax revenues. Rather than continuing to let sales tax revenues shrink – requiring taxes to be raised in other areas – it makes more sense to preserve the sales tax base by closing the federal sales tax loophole.
There is no reason why companies that are solely Internet-based shouldn’t have to collect and remit sales taxes, just as their Main Street Georgia competitors do. This Internet sales tax loophole makes it hard for Main Street Georgia retailers to compete with their online rivals. This not only hinders local job creation and the growth of local economies, it undermines the shopper-friendly commercial centers in Georgia communities.
Out-of-state and international Internet companies can take full advantage of Georgia markets, but do not have to contribute anything to the maintenance of infrastructure and public services that support those markets. Each year, Georgia loses millions of dollars in unpaid online sales tax.
The Marketplace Fairness Act simply creates a mechanism that empowers states to require sales tax payment on Internet transactions. It does not impose a new tax; it just makes it possible for states and communities to collect the tax revenue rightfully due to them. It exempts startup and small Internet sellers, and ensures states have sales tax policies that online retailers can easily follow.
It would do nothing more than what the name says – restore fairness for local Main Street Georgia businesses that provide jobs, pay taxes and support Georgia communities.
(Heath is the chairman of the Government Oversight Committee. He represents the 31st Senate District which consists of Haralson and Polk counties and portions of Paulding County. Reach him at 404-656-3943 or by email at email@example.com.)