If price, selection, and next-day, doorstep delivery drive your choice of online vendors, this development may not change your shopping habits much. Nonetheless, shopping on Amazon.com will cost Georgia shoppers at least 4% more starting today, and Georgia’s sales tax coffers are likely to benefit to the tune of about $18 million a year. (Hat tip to the Wall Street Journal: Amazon Will Begin Collecting Sales Tax in Georgia).
While it has taken Amazon some months to come into compliance with Georgia’s new law (the Georgia legislature recently changed the definition of “dealer” in OCGA 48-8-2 of the state’s sales tax statute, adding a definition applicable to larger Internet retailers with no physical presence in Georgia), Amazon already collects sales tax in a number of states, with more on the way.
Critics say that it is one thing to require companies that have a physical presence (maybe a distribution center or an office) in a particular state to collect sales tax for that state, but it is quite another to extend the long arm of that state’s department of revenue to reach across state lines to snag online retailers with no physical presence in the state. This argument is based on the 1992 Supreme Court ruling in Quill Corp v. North Dakota, which held that out-of-state retailer Quill, which sold office equipment via catalogs and various forms of general advertisement and then shipped its merchandise to customers in North Dakota by common carrier, did not have the substantial nexus in the State required by the Dormant Commerce Clause of the Constitution to subject it to the requirement by North Dakota that Quill act as the State’s sales tax collector. (You can read the Court’s full opinion here).
States argue that they are simply collecting revenue that they are entitled to collect anyway. After all, purchasers who are not charged sales tax online are on the honor system to remit the same amount they would have paid in sales tax to the Department of Revenue as a use tax; however, in practice, few ever do, and most citizens are probably not even aware of such a requirement. To force online retailers to capture and remit this otherwise uncollected revenue for them, states have sought by legislative slight-of-hand to say, for example, that anyone in the state with a “click-though” relationship with an online merchant (e.g., the millions of vendors on Amazon Marketplace) is that merchant’s agent and therefore establishes the merchant’s physical presence within the state.
Interestingly, while complying in some states, Amazon has chosen to go to the mat on New York’s requirement that Amazon collect tax for the State of New York, a case which the US Supreme Court may eventually hear. On the other hand, the argument may become moot if the Marketplace Fairness Act becomes law, a bill that claims to level the playing field for all online retailers, simplify state sales tax requirements, and make multi-state sales tax collection easy. The bill passed the the US Senate with a substantial majority (and is supported by Amazon, Walmart, and other large online retailers) but has yet to pass the House of Representatives, where practical, political, and ideological concerns currently stand in the way.
As for now, the bottom line for Amazon shoppers in Georgia is… well, 4% higher than it was yesterday.