Georgia Sales Tax Update – Economic Nexus

Two economic nexus sales tax bills – House Bills 182 and 276 – passed both houses of the Georgia General Assembly on March 29^th of this year. Georgia has now officially embraced the nationwide trend of adopting economic nexus standards as a way to capture lost sales tax revenues from out-of-state retailers. More and more states are instituting bills similar to Georgia’s House Bills 182 and 276; at the time of this blog, about half of the 50 states have done so. What do Georgia’s sales tax bills – and similar bills in other states – mean to Georgia business owners? To help you understand how these bills will impact you and your business, Wilson Lewis has provided a summary of key issues related to the topic below.

Economic Nexus Revisited

An economic nexus standard, which we first discussed in this introductory article, gives states the authority to collect sales taxes from out-of-state retailers who make sales to residents of their state. These sales are typically completed over the internet, and because the products are delivered using a third-party shipping company, out-of-state retailers never have to establish a physical presence. In the past, interstate commerce laws and legislative precedent protected these types of sales from taxation because of the retailer’s lack of physical presence. Any states that happened to hold economic nexus standards were unable to enforce their laws because the court case that established precedent – Quill v. North Dakota – did not allow for it.

However, just last year, the US Supreme Court ruled in South Dakota v. Wayfair that physical presence was no longer a requirement to establish sales tax nexus. The long-held precedent of Quill v. North Dakota was overturned, and economic nexus laws no longer violated interstate commerce clauses. Since this ruling, many states have begun to draft economic nexus laws in hopes of capitalizing on their newfound freedom to tax internet sales.

Georgia Economic Nexus

House Bill 182 was signed into law by Georgia Governor Brian Kemp on April 28, 2019. This bill – now known as Act 63 – lowers the sales threshold for determining sales tax nexus. As the Georgia tax code currently stands, online retailers who make at least $250,000 of sales (or 200 separate transactions) in Georgia will be required to collect and remit sales taxes. At Act 63’s effective date of January 1, 2020, this threshold falls to $100,000, making it much easier for out-of-state sellers to establish economic nexus with Georgia.

House Bill 276 has not yet been finalized, but it paints a similar picture for business owners. If passed, this law would require “marketplace facilitators” who meet the $100,000 in-state sales threshold to collect and remit sales taxes on behalf of their clients. Marketplace facilitators are companies that agree to market and facilitate the sales of products or services that belong to other businesses. In exchange, they receive sales commissions. eBay, Etsy, and even ride-sharing businesses like Uber and Lyft would qualify as marketplace facilitators.

This new law has the potential to level the playing field for both online and brick-and-mortar stores. Brick-and-mortar store owners have been at a disadvantage for years as they try to compete against online retailers who are able to sell their products without charging sales tax. That 6%, 8%, or 10% difference can be significant enough for taxpayers to shop online rather than a local store. On the flip side, small businesses that have a strong online presence may be unduly burdened with sales tax compliance requirements. Complying with one state’s sales tax laws – much less ten or twenty – is often too troublesome for small businesses to bear.

Contact Us

The regulations surrounding economic nexus can be complex, confusing and often vary by state. This makes it challenging for online business owners to understand their filing requirements. If you have questions about the changes to Georgia’s economic nexus rules or need assistance with a tax issue, Wilson Lewis can help! For additional information call us at 770-476-1004 or click here to contact us. We look forward to speaking with you soon