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Jamie C. Yesnowitz
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On May 3, 2018, Georgia Gov. Nathan Deal signed H.B. 61 enacting significant changes to sales and use tax laws, including imposing a bright-line nexus rule on certain sellers of tangible personal property.1
Effective Jan. 1, 2019, any seller that conducts 200 or more separate retail sales of tangible personal property for Georgia delivery or obtains more than $250,000 in gross revenue from such sales is considered a dealer that must either register to collect and remit sales tax or notify customers of use tax obligations and report to the state that such requirements have been fulfilled.
Remote seller collection and reporting requirements
H.B. 61 requires delivery retailers2
with gross revenue exceeding $250,000 from retail sales of tangible personal property or 200 or more separate retail sales in Georgia in the current or previous calendar year to either: (i) collect and remit sales tax to the state; or (ii) comply with new notice and reporting requirements.3
Retailers choosing to comply with the notice and reporting requirements must notify each potential purchaser immediately prior to the completion of each retail sale that: “Sales or use tax may be due to the State of Georgia on this purchase. Georgia law requires certain consumers to file a sales and use tax return remitting any unpaid taxes due to the State of Georgia.”4
Also, on or before Jan. 31 of each year, these retailers must send a sales and use tax statement to each purchaser who completed one or more retail sales with the retailer of at least $500 in the aggregate during the prior calendar year in an envelope containing the words “IMPORTANT TAX DOCUMENT ENCLOSED” on the exterior.5
Finally, on or before January 31 of each year, the delivery retailer must file a copy of the annual disclosure sent to each of its purchasers with the Georgia Department of Revenue: (i) on a form prescribed by the Department; (ii) that contains the total amount paid by each purchaser for retail sales from the delivery retailer during the previous calendar year, along with supporting information;6
and (iii) that includes the following statement: “Sales or use taxes may be due to the State of Georgia on the purchase(s) identified in this statement as Georgia taxes were not collected at the time of purchase. Georgia law requires certain consumers to file a sales and use tax return remitting any unpaid taxes due to the State of Georgia.”7
If a delivery retailer fails to comply with these notice and reporting requirements and reasonable cause is not shown, penalties will be imposed. With respect to the notice provisions to purchasers, a $5 penalty for each failure to issue a point-of-sale notification and a $10 penalty for each failure to issue an annual notification to a purchaser is applicable.8
A $10 penalty for each failure to report a purchaser transaction to the Department is also applicable.9
Updated use tax language
H.B. 61 modifies language requiring purchasers of out-of-state goods to pay use tax to include application of use tax to items that are stored for use or consumption in Georgia, instead of merely for items being stored in Georgia.10
Further, the legislation adds language stating “[i]t shall be prima-facie evidence that such property is to be used, consumed, distributed, or stored for use or consumption in this state if that property is delivered electronically or physically to a location within this state to the purchaser or agent thereof.”11
Dealers making retail sales of tangible personal property to be delivered electronically or physically to a location in Georgia are liable for the related sales or use tax, unless the purchase is exempt.12
Department declaratory action
The legislation permits the Department to bring a declaratory action13
against any dealer that has not been collecting and remitting the required sales tax.14
It appears that this clause was included in recognition of the unsettled nature of similar state laws pending a decision in the Wayfair case.15
Specifically, the law allows the Department to establish that the collection obligation is applicable and valid under state and federal law with respect to such a dealer.16
Further, if the action presents a question for judicial determination related to the constitutionality of the imposition of taxes upon such a dealer, the court must enjoin the state from enforcing the collection obligation.17
The superior court is required to act on the declaratory judgment and issue a final decision in an expeditious manner.18
Georgia legislators passed the new law including the bright-line nexus test on their second attempt, having failed to complete full passage of similar legislation introduced in last year’s legislative session.19
With its enactment, Georgia joins a growing number of states which have enacted bright-line nexus standards for sales and use tax, as well as notice and reporting requirements.20
Given the option to follow notice and reporting requirements provided to delivery retailers, the bill does not explicitly require delivery retailers to register for a sales and use tax license, which would be necessary in order to collect sales tax and remit it to the state. The bill also modernizes the sales and use tax rules by specifically stating that the electronic delivery of tangible personal property to a Georgia location is taxable. This update tacitly recognizes the fact that modern business transactions are now completed electronically rather than physically.
It is important to recognize that the Wayfair21
decision will have a major impact on what aspects of the legislation ultimately are utilized. If the U.S. Supreme Court decides in favor of Wayfair and upholds the physical presence nexus standard, Georgia would not be able to forcibly impose the economic nexus provisions and require dealers to collect and remit sales and use tax on that basis alone. However, the notice and reporting requirements would not necessarily be impacted, as such provisions have been endorsed by the 10th Circuit in its Direct Marketing Association decision.22
If instead, the U.S. Supreme Court decides in favor of South Dakota and endorses the use of economic nexus standards, Georgia likely would be free to impose economic nexus standards and require dealers to collect and remit sales and use tax. In that case,
Georgia (and other states) may be motivated to eliminate the notice and reporting requirement option currently being extended to remote sellers with economic presence.
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