Georgia Passes Far-Reaching Tax Bill

Late last month, the Georgia General Assembly passed significant tax legislation that now awaits the signature of its supporter, Governor Deal. HB 386 includes comprehensive changes affecting most individuals and businesses in Georgia.

Here is a summary of the major provisions that are included in this bill:

E-Fairness

The “Amazon rule” coming to Georgia? The objective of this provision is to subject purchases made at retail stores and on the Internet to similar sales tax rules. The bill adopts “click through” nexus for Internet retailers and their affiliates. For example, under the bill, Amazon would have to collect sales tax from Georgia customers so long as Georgia businesses use Amazon’s web-based platform. Should Amazon choose to terminate all of its contracts with Georgia-based businesses, as it did in California and North Carolina when similar legislation was passed there, then the bill will become futile.  Expect a lot of negotiation if this provision is signed into law.

New taxation of motor vehicles

State and local sales tax and ad valorem property tax are eliminated for vehicles purchased on or after March 1, 2013. Instead, the law imposes a 7% combined state and local title fee on new, used and leased motor vehicles. Fees for transfers between immediate family members are at a lower 0.5% rate. The fee applies to dealer sales, casual sales, leases, and out-of-state purchases transferred to Georgia. Between the law’s effective date and March 1, 2013, the purchaser may elect either the new title fee system or the existing sales and ad valorem tax system.

 Retirement Income Exclusion

The retirement income exclusion is capped for filers age 65 and older at its current 2012 level of $65,000. Absent this cap, the retirement income exclusion would have been unlimited beginning in 2016.

 Simplification of Manufacturing, Mining, Agricultural Sales Tax Exemptions

The bill provides a sales tax exemption on all business inputs, such as machinery, consumable supplies, equipment, and energy necessary and integral to producing tangible personal property, agricultural, horticultural, and livestock products. Beginning January 1, 2013, the bill will phase in over four years a sales tax exemption on energy used in manufacturing and mining. Local governments may opt into the exemption for local sales tax on energy. The bill also defines a qualified agricultural producer and requires application for the exemption with the Commissioner of Agriculture. To quality, the owner or lessee of property must produce at least $2,500 in agricultural products during the year.

Sales Tax Holiday

The bill reinstates the sales tax holiday for qualifying computers, school supplies, clothing, and energy-efficient equipment and sets the dates as August 10 – 11, 2012.

We will keep you posted as this bill heads towards signature.

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