While Amazon drags its feet and the state plays chicken for jobs, small business suffers
Last legislative session, the Georgia Assembly passed sweeping legislation that changed several of the mainstays of state revenue collection, including forcing out-of-state companies like Amazon to pay sales tax.
A Georgia company using the internet to sell items to Georgians was always required to collect sales tax, but it wasn’t until January 1 that companies outside Georgia — in other words, those companies without a physical presence in the state — were required to do it.
Loosely called the e-fairness bill, this change basically expanded the definition of a physical presence to include other websites through which a company gets its traffic, and those internet retailers, like Amazon, who fell into that category were supposed to start paying sales tax to the state starting the first of the year.
By all reports that hasn’t happened, and it’s taking a toll on local businesses, who are not only trying to match the prices of companies with considerably more buying power, but also with those who have the advantage of not paying sales tax, which for the Augusta region rose to 8 percent with the passage of the TSPLOST.
“It’s not an issue of head-to-head price,” says Larry Moore, owner of Trucks and Moore, a service and accessory center located in Martinez. “It’s an issue of that tax advantage.”
Moore says he frequently gets customers who come in, get their vehicles sized, then go out and purchase the parts online, often with unexpected complications.
“People buy products over the internet and a lot of times they open the box and start reading the directions and go, ‘This is over my head,’ and they bring it to us and we put it on,” Moore says. “The customer buys on price and they don’t know they’re going to need a lot of other things.”
Frequently, these parts are not just complicated, they’re of a poor quality or come missing other needed parts, which prompted Moore to go to a stepped labor rate and then a lift fee in case missing or deficient parts kept a lift occupied longer than the job required.
Initially, he says he considered those things an irritation, but more and more he and other retailers are losing significant sales to online retailers like Amazon.
Recently, he followed up with a customer who had priced tires and found out the individual had purchased the tires online.
“I asked him what he paid for them and it was within $20 of what we quoted him,” Moore says. “But he said he didn’t have to pay tax on them, and they were tires that cost about $480 a piece, so we were almost $200 higher because of the tax, where really we were only about $18 to $20 higher. For $18 or $20, he could have bought local, but when it’s $200, there’s no question in his mind.”
Of course everyone who purchases something online is supposed to pay the use tax back to the state, but who among us does that?
“There are so few people who would do it, and the state doesn’t have the resources to track those folks down, anyway,” says Kyle Jackson, Georgia state director of the National Federation of Independent Business.
So if consumers can’t be trusted to voluntarily level the playing field, small business owners like Moore say it’s up to government, which ironically passed a law, yet has not enforced it, something Jackson indicates tends to be standard operating procedure.
“[Amazon] is in talks with the Administration and the Department of Revenue as to how they’re going to start complying with that,” Jackson says. “I know their strategy in other states was to either litigate or go to the Department of Revenue or Taxation and basically say ‘Give me x-number of months to comply and we’ll promise to put a distribution center somewhere in your state.’ That buys them some time for compliance purposes and then the state gets promised jobs out of the deal.”
Though Jackson wouldn’t say if that’s what happening here in Georgia, if history is any indication, Amazon seems to be incorporating the nation’s increasing desire to collect tax revenue into its growth strategy. In Tennessee, where they recently passed a law similar to Georgia’s, tax collection won’t begin until next year, but Amazon promised to add 3,500 full-time jobs on top of a $350 million capital investment. Texas was promised 2,500 new jobs over four years and South Carolina made an agreement with Amazon that keeps its sales in the state tax free until 2016 as long as it creates 2,000 jobs by the end of the year.
Adding distribution centers where required allows Amazon to manage its growth while at the same time strategically managing law changes that will eventually demand compliance.
Dragging their heels this compliance seems to play into their hand because, according to Jackson, the states seems to be no real rush to implement the law change, even though in Georgia’s case, officials expected to collect $16 million over the course of the year.
“Frankly, the way these types of laws are passed, the law may take effect, but there’s always a kind of delay because Amazon has litigated in some of the states where they feel the state laws are unconstitutional, or in other states, they’ve used more of a negotiating type of tactic.”
That negotiating tactic can prove valuable to state coffers once the jobs arrive, but it comes at the expense of companies like Moore’s, which have just that much longer to compete on the uneven playing field. You Might Also Like: