Copyright 2000 to present
Governor Deal, Don't Put Us Out Of Business
(2-14-12): Dear Governor Deal and members of the Georgia Legislature... please don't force thousands of small Georgia businesses to close their doors this year by rushing to pass a flawed piece of legislation aimed at collecting sales taxes on purchases made online. There is a better way to reach your desired result without destroying an entire industry.
Current federal law, upheld by the U.S. Supreme Court, says that a business does not have to collect sales taxes on mail order, telephone, or Internet purchases except for sales made to residents of any state where that business has a physical presence... or in legal terminology "a physical nexus".
Pressure is building, fueled by Home Depot and organizations representing brick & mortar retailers, for Georgia to find a way to do an end run around federal law and force out of state firms to collect sales taxes from Georgia residents. Under a proposal now before the Special Joint Committee on Georgia Revenue Structure, any Internet retailer that has an affiliate relationship with any person or business in Georgia will be deemed to have established "physical nexus" in Georgia and thus must collect sales tax.
While some may see this as a clever move, Governor Nathan Deal (R) and some members of the state legislature have not taken the time to study what happened in Illinois when a similar law was enacted.
Immediately upon passage of the Illinois law, Amazon.com and dozens of other Internet merchants fired all of their affiliates in Illinois in order to avoid the new definition of physical nexus. Most of the thousands of affiliates in Illinois were forced to close down... put out of business by their own state government, while a few larger affiliates moved their operations to neighboring states.
The bottom line? By firing their affiliates, Amazon and the other Internet firms avoided this new definition of physical nexus and still did not have to collect sales tax on purchases made by Illinois residents. Plus the State of Illinois lost millions in income tax revenue they would have collected each year from the now defunct affiliates.
The same thing will happen here in Georgia... meaning 6,000 fulltime Georgia affiliates (plus the part-timers) will be wiped out... their businesses gone. $483 million in affiliate commissions paid to Georgians will evaporate. Georgia will no longer receive income taxes on that $483 million, & state & local governments will lose sales tax revenue as that $483 million disappears from Georgia's economy. (Affiliates paid $29 million in GA income tax in 2010)
If Governor Deal and the Republicans in the General Assembly believe Internet merchants should collect sales taxes, there is a way to do so without unleashing the law of unintended consequences.
Within one to two years a national solution to the Internet sales tax dilemma will come to fruition. Amazon.com and other major Internet retailers have signed on to the plan being developed and many states are supporting this comprehensive national plan.
Instead of putting thousands of Georgians out of work, Georgia should join the national coalition.
This national measure will give the brick & mortar retailers the level playing field they want... give state and local governments the sales tax revenues they want... and provide a simplified system for Internet retailers to collect sales tax across hundreds of individual taxing jurisdictions.
There are some substantial companies in Georgia employing many people for which affiliate marketing is their primary source of revenue. I began a side business as an affiliate for Amazon.com and some other Internet retailers thirteen years ago. This business grew to become my main fulltime income stream and today we operate well over 100 websites.
If this bill as drafted passes, I, as a 9th generation Georgian, will be one of those forced to uproot my family and move to a neighboring state.... or face losing everything I have overnight.
Please do the right thing... reject this bill and join the national coalition. That's my opinion, I welcome yours. Click To See Fact Sheet On e-Fairness