The State of Georgia has just passed a bill which includes what has become known as an “Amazon tax”.
Some believe this to be a “good news” for the state. But is it really?
House Bill 386 (which received 155 votes in favor and 9 against in the House three days ago) has received final passage being unanimously approved by the General Assembly (54 in favor, 0 against).
Among other provisions and types of “affiliate” relationships, the Bill 386 also applies to situations “under which the resident, for a commission or other consideration, based on completed sales, directly or indirectly refers potential customers … by a link on an Internet website”, which, basically includes Internet affiliates residing in Georgia.
And while the Georgian threshold is higher than what we’ve seen in other states (the bill says that “the cumulative gross receipts from sales by the person to customers in this state” must be “in excess of $50,000.00 during … 12 months”), it is hardly a “good news” for Georgia-based affiliates.
On Tuesday, after the House blessed the Bill, The Atlanta Journal-Constitution wrote emphasized the “key element of the tax plan” which “would be a sales tax on some Internet purchases”.
It was also pointed out that the tax “would produce $81 million in state and local revenue over three years” and “bring Georgia new jobs”. Alas! Experience in other states shows quite the contrary… As my numerous posts on this topic exemplify, the sadly already-customary sequence is quite the opposite:
(i) affiliates get terminated by online retailers who do not want to collect the tax (read: job loss),
(ii) and instead of collecting additional revenue, states actually reap a loss of tax revenue (in unpaid state income taxes).
Here are just two vivid examples: Rhode Island (Dec 21, 2009)
In April, researchers at the University of Tennessee estimated Rhode Island’s government would forego a total of $132.7 million in sales tax revenue from 2007 through 2012. The average annual loss is equal to 2.5 percent of the state’s total sales tax collections in 2007. But the state law has done nothing to increase tax revenue. Officials at the R.I. Department of Revenue “do not believe that there has been any sales tax collected as a result of the Amazon legislation,” said Paul L. Dion, who heads the department’s revenue-analysis office. [source: “‘Amazon Tax’ Has Not Generated Revenue” article by Providence Business News]
Illinois (Mar 16, 2012)
Sen. John Cullerton …boldly stated that “Illinois would generate an additional $150 million in much-needed revenues” under the new law. Skeptical of that huge amount of money (which would have been a more than 50% increase in use tax collected), we looked at the numbers and determined it was way off… [From January 2011 through June 2011 there has actually been a] decrease in use tax collected of over $11 million. Not only did smaller websites based in Illinois lose a revenue stream, but larger companies that rely more heavily on affiliate income like Fat Wallet and Coupon Cabin simply packed up and moved to neighboring states, taking their jobs and income tax with them. [source: “‘Amazon Tax’ Fails to Raise One Cent of New Revenue” article by Chicagoist]
Is any additional comment required here; or do facts speak louder than any words?