High Court To Decide Reach Of New Ga. Online Sales Tax Law

Online shopping is set to become more expensive in Georgia. That’s because of a new state law expanding the sales tax.

But the rule enters some uncertain legal territory.

“Constitutionally, it is not settled at all,” said Lucia Smeal, who teaches accounting at Georgia State University.

The Georgia law targets online retailers that make $250,000 a year or handle more than 200 transactions, regardless of where they are physically based.

Smeal said whether states can stick out-of-state online companies with sales taxes has been the subject of years of dispute.

The question has finally reached the U.S. Supreme Court, although Smeal said the justices haven’t revealed what they’ll do. The decision is expected by the end of June.

If the court agrees with states going after these online taxes, Smeal said Georgia lawmakers likely wanted to be prepared.

“Georgia will already have a law in place where they can start moving ahead with sales tax collection,” she said. “Otherwise it would take another session.”

Yet, even if the court decides to strike down online sales tax laws, Georgia still will have a way to recoup the revenue, said Jonathan Feldman, an Atlanta-based partner at Eversheds Sutherland.

He said the new law also has a requirement that online retailers report purchases that were not subject to sales taxes. In that way, the state could collect the unpaid tax from the buyers, if not the seller.

But Feldman said that rule has faced legal challenges of its own. Some worry it’s an invasion of privacy.

“The concern would be I buy a book on a topic. The state has no right or need to know what kind of books I’m buying,” Feldman said.

The Georgia rules will go into effect January of next year. If the full law is upheld, Georgia State University has estimated that state and local governments could see as much as $600 million in new revenue from online sales by 2022.