The 155th Georgia General Assembly’s first major legislation of its second session has been signed by Gov. Brian Kemp and will take effect April 1, closing unofficial sales tax loopholes for non-traditional vendors by mandating sales tax collection by “marketplace facilitators.”
Wasting little time after the January 13 open of the 2020 session, lawmakers from both the Georgia House and Senate approved House Bill 276 on Jan. 16, after discrepancies in the details of House and Senate versions were resolved by a conference committee made up of three House and three Senate members. The resulting legislation will mandate that “marketplace facilitators” collect sales tax and remit it to state and local entities. Only sales to Georgia residents are covered under this bill.
After version discrepancies were resolved by the conference committee, the bill passed the Senate with no debate on the floor (40 yea, 9 nay, 5 not voting, 2 excused absence, Senator John Wilkinson voted ‘yes’), while the House engaged in a short debate before recording a 111 yea, 54 nay, 5 not voting and 10 excused absence vote with Rep. Chris Erwin voting ‘yes’.
Marketplace Facilitators are businesses – typically internet- or app-based businesses such as Ebay, that sell goods or services provided by third party sellers.
Prior to passage of HB 276, retail “dealers” were required to collect sales taxes from customers. The bill expands the definition of “dealers” to include “marketplace facilitators” that provide a platform – typically on the internet – for vendors to sell goods or services. Any “marketplace facilitator" that realizes annual sales of $100,000 or more to Georgia residents are now required to collect and remit all state and local sales taxes on those sales. Additional specifications about collection methods are detailed in the bill regarding franchise operations with more than $500 million in annual Georgia sales – such as hotel chains. (See HB 276 text below)
Proponents of the bill point out that the legislation does not create any new taxes, but instead only provides a method and means for collecting taxes that were already mandated but that had been difficult to collect. The bill provides a level of equity for traditional brick-and-mortar stores and businesses that already have to pay taxes on similar – or often exactly the same - products and services, said Senator Chuck Hufstetler, who sponsored the bill.
In Georgia, more than $150 million in sales tax revenue for online- and app-based sales goes uncollected each year, Representative Brett Harrell said during a hearing on the bill. A report released by the Faith, Justice and Truth project puts that estimate closer to $750 million. Data released by the state estimates that the bill could increase revenue by $143 million in the first year - $78 in state revenue, and an additional $65 million for local governments.
Similar laws have been passed in more than 30 other states.
Originally, the “marketplace facilitator” bill only applied to internet organizations such as Ebay and did not include peer-to-peer, economy-sharing services such as AirBnB, Lyft or Uber. The version of the bill signed by Deal includes such app-based services. There is "no difference" between rental services and ride-share services, Harrell stated, adding, "If you have a taxable service or taxable product of any kind, shape, form or fashion, you are included. There is no exemption for anyone.” However, some legal questions remain on whether services such as Uber and Lyft actually provide services that are taxable under the current tax codes. Since HB276 does not create new taxes, and only provides for collection methods for already-imposed taxes, if it is legally determined that Uber and Lyft services are not taxable under current tax codes, they would not be included in the mandates of HB 276. “We agree that addressing inequities between online and brick and mortar retailers is an important issue. However, if action is not taken to put a reasonable fee structure on rideshare in place, Georgians will end up paying one of the highest rideshare taxes in the nation,” Uber representative Evangeline George stated in comments about HB 276.
BILL TEXT AS SIGNED BY THE GOVERNOR
A BILL TO BE ENTITLED AN ACT To amend Chapter 8 of Title 48 of the Official Code of Georgia Annotated, relating to sales and use taxes, so as to revise the definition of dealer; to require the collection and remittance of sales tax by certain persons that facilitate certain retail sales; to define marketplace facilitator and marketplace seller; to prohibit certain class action suits; to provide for limitations and exceptions; to provide for related matters; to provide for an effective date and applicability; to repeal conflicting laws; and for other purposes.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA:
Chapter 8 of Title 48 of the Official Code of Georgia Annotated, relating to sales and use taxes, is amended in Code Section 48-8-2, relating to definitions, by adding a new subparagraph to paragraph (8) and by adding two new paragraphs to read as follows:
"(M.3) Acts as a marketplace facilitator to facilitate retail sales that are taxable under this chapter to be delivered, held for pickup, used, consumed, distributed, stored for use or consumption, or rendered as a service within this state, if the total value of the sales price of all such retail sales, combined across all its marketplace sellers and the marketplace facilitator itself, equals or exceeds $100,000.00 in aggregate in the previous or current calendar year;" "
(18.1) 'Marketplace facilitator' means a person that contracts with a seller in exchange for any form of consideration to make available or facilitate a retail sale that is taxable under this chapter on behalf of such seller by directly or through any agreement or arrangement with another person:
(A) Providing a service that makes available or facilitates such retail sale in any manner, including, but not limited to, promoting, marketing, advertising, taking orders or reservations for, providing the physical or electronic infrastructure that brings purchasers and marketplace sellers together for, or otherwise similarly assisting the seller in making such retail sale, or transmitting or otherwise similarly communicating the offer and acceptance between the marketplace seller and the purchaser for, or otherwise similarly assisting the seller for such retail sale, but excluding merely processing the payments for such retail sale; and
(B) Collecting, charging, processing, or otherwise similarly facilitating payment for such retail sale on behalf of the marketplace seller. (18.2) 'Marketplace seller' means a person that conducts a retail sale through or facilitated by any physical or electronic marketplace or platform operated directly or indirectly by a marketplace facilitator, regardless of whether such marketplace seller is required to be registered with the department pursuant to Code Section 48-8-59."
SECTION 2. Said chapter is further amended in Code Section 48-8-30, relating to imposition of tax, rates, and collection, by adding a new subsection to read as follows:
"(c.2)(1) A marketplace facilitator that meets the definition of a dealer provided in subparagraph (M.3) of paragraph (8) of Code Section 48-8-2 shall constitute the dealer and retailer for each retail sale taxable under this chapter at retail that it facilitates within or outside this state on behalf of a marketplace seller if such retail sale is sourced, as provided in Code Section 48-8-77, to a location within this state.
(2)(A) All taxes levied or imposed by this chapter on retail sales described in paragraph (1) of this subsection shall be paid by the purchaser to the marketplace facilitator that facilitates the retail sale on behalf of a marketplace seller.
(B) The marketplace facilitator shall remit such taxes to the commissioner as provided in this article and, when received by the commissioner, the taxes shall be credited against the taxes imposed on the retail sale.
(C) Each marketplace facilitator shall be liable for the full amount of taxes levied or imposed by this chapter on all retail sales described in paragraph (1) of this subsection or the amount of tax collected by such marketplace facilitator from all purchasers on 53 all such retail sales, whichever is greater.
(3) For the purposes of this subsection, it shall be prima-facie evidence that a retail sale is sourced to a location within this state if it is to be held for pickup, used, consumed, distributed, stored for use or consumption, or rendered as a service within this state.
(4) No retail sale that is not taxable to the purchaser at retail shall be taxable to the marketplace facilitator. Taxes collected and remitted by a marketplace facilitator pursuant to this subsection shall be subject to the credit otherwise granted by this article for like taxes previously paid in another state. This subsection shall not be construed to require a duplication in the payment of any tax.
5) A marketplace seller shall not be obligated to collect and remit or be liable for the taxes levied or imposed by this chapter on any retail sale for which its marketplace facilitator is obligated and liable.
(6) The department may bring an action for a declaratory judgment in any superior court against any person that meets the definition of a dealer as provided in subparagraph (M.3) of paragraph (8) of Code Section 48-8-2, in order to establish that the collection obligation and liability established by this subsection is applicable and valid under state and federal law with respect to such a dealer. If such action presents a question for judicial determination related to the constitutionality of the imposition of taxes upon such a dealer, the court shall, upon motion, enjoin the state from enforcing the collection obligation against such a dealer. The superior court shall act on such declaratory judgment action and issue a final decision in an expeditious manner.
(7) No class action may be brought against a marketplace facilitator in any court of this state on behalf of customers arising from or in any way related to an overpayment of sales or use tax collected on sales facilitated by the marketplace facilitator, regardless of whether that claim is characterized as a tax refund claim. Nothing in this subsection affects a customer's right to seek a refund of taxes erroneously paid.
(8) The department shall solely audit the marketplace facilitator for sales made by marketplace sellers but facilitated by the marketplace facilitator. The department will not audit marketplace sellers for sales facilitated by a marketplace facilitator except to the extent the marketplace facilitator seeks relief under paragraph (9) of this subsection.
(9) A marketplace facilitator is relieved of liability for failure to collect and remit the correct amount of tax imposed by this chapter to the extent that the marketplace facilitator demonstrates to the satisfaction of the department that the error was due to insufficient or incorrect information given to the marketplace facilitator by the marketplace seller and the marketplace facilitator made a reasonable effort to obtain correct and sufficient information from the marketplace seller; provided, however, that this paragraph shall not apply if the marketplace facilitator and the marketplace seller are related members as defined in Code Section 48-7-28.3. Where a marketplace facilitator is relieved of liability under this paragraph, the marketplace seller is solely liable for the amount of uncollected tax.
(10) A person that is a franchisor as such term is defined by 16 C.F.R. 436.1 shall not be a marketplace facilitator with respect to any dealer that is its franchisee, as such term is defined by 16 C.F.R. 436.1, and that would otherwise be a marketplace seller of such franchisor, provided that:
(A) In the prior calendar year, such franchisor and all of its franchisees combined made annual gross sales in the United States of at least $500 million in aggregate;
(B) Such franchisee maintains a valid certificate of registration as required by Code Section 48-8-59; and
(C) Such franchisee and franchisor maintain a valid contract providing that the franchisee will collect and remit all applicable taxes and fees that the franchisor would otherwise be required to collect and remit as a marketplace facilitator for such franchisee.
(11) A person shall not be a marketplace facilitator with respect to any dealer that would otherwise be its marketplace seller if:
(A) In the prior calendar year, such dealer made annual gross sales in Georgia of at least $500 million;
(B) Such dealer maintains a valid certificate of registration as required by Code Section 48-8-59; and
(C) Such dealer and person that would otherwise be the marketplace facilitator maintain a valid contract providing that the dealer will collect and remit all applicable taxes and fees that such person would otherwise be required to collect and remit as a marketplace facilitator for such dealer.
(12) A dealer shall return and report retail sales for which the dealer acted as a marketplace facilitator to the department as otherwise required by this chapter; provided, however, that such dealer may elect to return and report such retail sales either:
(A) Separately from retail sales made directly by such dealer using a separate marketplace facilitator return that shall be published by the department for such purposes; or
(B) Together with all other retail sales made directly by such dealer."
SECTION 3. This Act shall become effective on April 1, 2020, and shall apply to all sales occurring on or after April 1, 2020.
SECTION 4. All laws and parts of laws in conflict with this Act are repealed.