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Tuesday, May 1, 2012 - 2:45am

Tax Reform Targets Online Retailers

Georgians only have a few months left to buy over the Internet and avoid sales taxes through some retailers. A new law will force some online sellers to start collecting sales tax. Brick-and-mortar shop owners like Joe Mediate call it a first step toward leveling the playing field.

Mediate keeps hearing a particular comment from shoppers at his Roswell children’s store, Koo Koo Bear Kids.

“They’re saying, ‘I can get this cheaper online’,” he said during an interview at the shop. “They’re showing our people and saying, ‘Hey can you match this?’ And we match the price, and then they say, ‘Hey can you do something about the sales tax?’.”

Unfortunately, Mediate can’t skirt the law.

“It’s really awkward for our people,” he said. “We just say no and leave it at that because it’s just really awkward.”

Mediate began selling children’s furniture about a decade ago through a catalog-only business. He opened this Roswell shop in 2009, and he says Georgians want *both* kinds of shopping experiences.

“I knew the Internet was going to be a critical piece,” he said. “I didn’t realize that people would want to touch and feel baby stuff as much as they do. They want the experience – they don’t necessarily always want to pay for it – but they want the experience so it’s interesting how you have to balance the two.”

There’s a lot to touch at Koo Koo Bear Kids, which sells everything from one-of-a-kind baby clothes to strollers to original art for children’s rooms.

And maintaining it all costs money. The new tax law is called E-Fairness, and that’s how retailers like Mediate see the issue.

It will require online retailers to collect tax on Georgia sales if the companies have a physical presence here through affiliates or subsidiaries.

Other states have passed similar measures that many have dubbed the Amazon law, after the mega online retailer, which has affiliates in Georgia.

Rick McAllister, head of the Georgia Retail Association, calls the problem a collection issue that needlessly hurts local shop owners.

“We are simply part of an evolving retail marketplace,” he said. “The marketplace has changed but the tax system has not. And so it’s put brick-and-mortar retailers and your friends and neighbors at a very big unfair disadvantage to out-of-state, non-Georgia companies.”

The state projects it will net about $50 million in new revenue over three years from the tax, says Alan Essig, who heads the Georgia Budget and Policy Institute.

“This bill that just passed catches a very small percentage of Internet sales, but it’s the first step Georgia has taken to try to get a piece of that money,” he said.

The larger goal is taxing all online purchases, which in Georgia is estimated at between $300 million and $500 million.

But only Congress can require a sales tax on all Internet businesses.

And Essig says the pressure will be on Washington as state sales tax revenues continue to decline.

“It’s a serious problem for all 50 states, and I think it’s something Congress is going to have to take up sooner rather than later,” he said.

McAllister with the retail association agrees. But he says it won’t happen overnight.

“Federally it could be a year or longer,” he said. “There are bills introduced in Congress that could get this done, but there have been bills introduced before.”

Some tax opponents disagree with collecting the sales tax. An Amazon spokesman wouldn’t comment on Georgia’s law but said the retailer favors a single, federal solution for all 50 states.

Back at Koo Koo Bear Kids, Mediate says it’s just a matter of time before all online retailers collect sales tax. And he says he’s glad Georgia lawmakers took the first step.

“In some ways, this is really long overdue,” he said. “This should have happened a long, long, long time ago.”

The law takes effect October 1.