Georgia will require online retailers to file sales tax compliance returns beginning January 1, 2019, if their annual Georgia revenues exceed $250,000 or if they have more than 200 separate retail transactions within the state per calendar year.
As an alternative to collecting Georgia sales tax from its customers and filing sales tax compliance returns, the retailer may instead send “tax due” notices to all Georgia customers who purchased more than $500 of taxable goods during the year. The law, which originated as House Bill 61 and became Act 365, was signed by Governor Nathan Deal on May 8, 2018.
Since 1992, state revenue agencies have been unable to force retailers who do not have physical nexus within their state to file sales tax compliance returns or to collect and remit sales taxes from their customers. The Supreme Court of the United States’ ruling in Quill Corp. v. North Dakota defined nexus as having a sufficient physical presence, such as a brick-and-mortar store or distribution center, within the state.
This precedent is currently being challenged by a case awaiting a final ruling by the Supreme Court, South Dakota v. Wayfair, Inc. South Dakota is arguing that the Quill ruling is outdated since online retail sales now constitute a significant portion of sales for retailers. The inability of states to require retailers to file sales tax compliance returns discriminates against brick-and-mortar stores that must charge sales tax, thereby increasing prices for consumers and making them less competitive against online retailers that are not required to collect sales taxes.
Furthermore, state governments are losing potential revenue from online retail sales, approximately $13.7 billion in the 2017 calendar year, according to an audit by the U.S. Government Accountability Office. The state of Georgia’s Department of Audit and Accounts estimates that Georgia’s sales tax compliance revenues will increase by approximately $1.64 billion over the next five years as a result of Act 365.
Even though Act 365 has been signed into law, the Supreme Court will still need to overturn Quill in order for Georgia to require retailers to collect sales tax from their customers and to file Georgia sales tax compliance returns.
Essentially, Act 365 was a preemptive measure taken by Georgia’s Legislature to jump-start the process prior to adjourning the 2017-2018 Regular Session on March 29, 2018. Online sellers should begin making preparations to register and comply with Georgia sales tax reporting requirements while keeping an eye towards the South Dakota v. Wayfair, Inc. decision.
Have questions? Contact Aaron Giles.
Author: Aaron Giles is the Founder and President of Agile Consulting Group. Aaron spent five years working within the specialty niche of Sales & Use Tax at Brown & Associates before forming his own firm in 2005. He has worked hundreds of audits in states all across the U.S. during that time and has delivered savings of over $75M in the form of refunds and credits to his clients. Today, he leads a group of talented, detail-oriented colleagues who focus exclusively on Sales & Use Tax.