Online Sales Tax Bill Tied to Risky Georgia Income Tax Cut

Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...

By Chris Marr

Online retailers are a step closer to being required to collect and remit sales tax on sales into Georgia.

The Senate Finance Committee approved March 22 sales tax legislation that would require sellers with more than $250,000 of sales or 200 transactions into the state annually to collect and remit the tax or else to report their transactions to the state and notify customers of their tax liability.

However, the committee combined the sales tax bill ( H.B. 61) with a separate income tax cut proposal ( H.B. 329) in a way that the bills’ sponsor said might hurt both proposals’ chances with Gov. Nathan Deal (R). And the House and Senate have only a week left in the session to work out their differences on the bills.

The combination “might improve its chances on the Senate floor, but I don’t think it improves its chances overall,” said Rep. Jay Powell (R), sponsor of H.B. 61 and H.B. 329 and chairman of the House Ways and Means Committee.

“I think it invites a veto,” Powell told Bloomberg BNA after the committee meeting.

Governor on Record With Concerns

The Senate’s version contains a larger income tax cut than the version of H.B. 329 the House approved previously.

The governor has raised concerns in the past about sizeable income tax cuts. He declined to comment on the pending legislation, his spokeswoman Jen Talaber Ryan told Bloomberg BNA March 23.

If the Senate passes the revised H.B. 329, a conference committee will need to reach agreement on a final version before the Legislature adjourns for the year March 30.

“There’s still going to be some work between the House and the Senate on this,” said Sen. Chuck Hufstetler (R), chairman of the Senate Finance Committee.

Similar Bills in Half of States

Almost half of all state legislatures this year are considering bills to impose sales tax duties on online and out-of-state sellers—either through collection requirements or reporting and notification.

The bills requiring sales tax collection by out-of-state sellers directly challenge Supreme Court precedent, which blocks states from requiring sales tax collection by companies without an in-state physical presence.

The effort has been dubbed the “ kill Quill” movement, named after the Supreme Court’s 1992 Quill Corp. v. North Dakota decision, which reaffirmed the physical presence rule. An Alabama revenue department regulation and a South Dakota law similar to Georgia’s proposal are already tied up in litigation challenging their constitutionality.

Despite some states’ eagerness, the bills aimed at capturing tax revenue from e-commerce aren’t a sure-fire win. In New Mexico, Gov. Susana Martinez (R) has suggested she could veto such a measure sent to her desk by a Democratic-controlled Legislature. A similar bill also failed to pass for a second year in row in the Utah legislature, which concluded its 2017 session March 9.

No Movement on Florida Bill

In Florida, a similar bill has shown no signs of movement so far.

Florida’s S.B. 1184 would require out-of-state sellers with more than $100,000 of sales or at least 200 transactions annually into the state to collect and remit sales tax.

The bill is sponsored by Sen. Randolph Bracy (D), a member of the minority party in a GOP-controlled Legislature. The bill hasn’t yet received a hearing at its first of three required committee stops before being eligible for a Senate floor vote. A matching bill on the House side, H.B. 1343, is stuck in the same position with no committee hearings thus far.

Bracy didn’t immediately respond to a request for comment.

Georgia Proposal Revenue Neutral?

The Georgia Legislature’s newly merged H.B. 329 would cut $270 million in individual income taxes by lowering the top rate to 5.65 percent and adjusting personal exemptions. The sales tax requirements—previously contained in H.B. 61—would raise an estimated $274 million for the state by bringing in sales tax from e-commerce transactions that go uncollected.

Senators at the March 22 finance committee meeting described their revisions and merging of the bills as a way to create a revenue-neutral proposal that conservative senators would prefer. Some viewed H.B. 61 as a tax hike.

But the changes to the income tax proposal significantly increased the revenue impact, Powell said, and projected revenue from the sales tax bill is highly uncertain. The governor has previously expressed reservations about trading a stable base of income tax revenue for less predictable sales tax revenue, partly out of fear of hurting the state’s AAA bond rating.

Lawsuit Likely

The requirement for out-of-state sellers to collect sales tax is likely to be delayed pending an inevitable lawsuit. Whether and when the state will collect new sales tax revenue from out-of-state sellers is unknown, Powell said.

Powell’s original proposal to flatten the income tax at 5.4 percent would have cost the state about $70 million, according to Senate committee members. But the committee was concerned that many lower-income and middle-income people would pay more in taxes under the plan, Hufstetler said.

The House bill had included a state version of the federal earned income tax credit to partly offset the impact on low-income families. The Senate committee version gets rid of the EITC but increases the personal exemption by a comparable amount. The Senate version also leaves Georgia’s graduated income tax rates in place.

The bills don’t affect the state’s corporate income tax rate, which remains at 6 percent.

To contact the reporter on this story: Chris Marr in Atlanta at

To contact the editor responsible for this story: Ryan C. Tuck at

For More Information

Text of Georgia H.B. 329 is at

Text of Georgia H.B. 61 is at

Text of Florida S.B. 1184 is at

Copyright © 2017 Tax Management Inc. All Rights Reserved.

Request Daily Tax Report: State