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Deal considers uncollected tax on Internet sales
E-commerce tax merely in 'abstract' for now as revenue enhancer
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Gov. Nathan Deal isn't sure how lawmakers might make up some $140 million in lost revenue if they follow through on his proposal to eliminate a state sales tax charged to manufacturers on their energy use.

"That's not an easy answer," the governor said. "I don't think there is much appetite in this election year, quite honestly, to pass anything that appears to be a tax increase."

But one possibility, he says, is collecting sales tax on e-commerce in Georgia. The state already has a right to collect sales tax on Internet purchases, but has done little to capture the revenue.

"It is something that has been talked about in the abstract for a long time," Deal said. "Everybody has sort of been waiting on Congress to act on that as well, to say ‘it's OK for states to do this.'"

Currently, Internet retailers that have a physical presence in Georgia, such as Walmart and Target, charge state sales taxes to online customers. Those that operate only on the Web are not required to collect the tax.

Georgia officials have been waiting on federal lawmakers to close the Internet tax loopholes, but say it may be time to take the matter into their own hands.

A dozen or so bills to address the matter in Congress have failed in the last decade, according to Doug Sheppard, news editor of State Tax Notes, a publication that tracks tax trends.

"All the states are going to do something," said Sen. Butch Miller, R-Flowery Branch, a floor leader for the Deal administration. "We were waiting on Congress to enact something federally, but they're not going to do it. When is the last time Congress did anything?"

Unpaid taxes in Georgia are conservatively estimated at $365 million for 2011 and more than $410 million in 2012, according to a University of Tennessee study.

The governor's budget proposal released Wednesday does not include a suggestion for lawmakers to seek uncollected sales taxes on Internet purchases. Nor does it account for the $140 million the state will lose if it eliminates a sales tax charged to manufacturers for energy use.

Lt. Gov. Casey Cagle indicated Thursday that lawmakers might choose to phase the tax out over time rather than completely eliminating it this year.

Any change to the energy sales tax will have to be revenue neutral, meaning lawmakers will have to replace the revenue elsewhere, Miller said.

Lawmakers who might be reluctant to create new taxes this year could be willing to make up the difference with uncollected taxes on e-commerce, especially as "brick-and-mortar" stores complain of the disadvantage between them and Web-based retailers, Deal said.

Rick McAlister, President of the Georgia Retail Association, said Deal's comments underscored a need to "level the playing field between local brick-and-mortar stores and out-of-state, online-only retailers."

Another group, the Alliance for Main Street Fairness, issued a statement Thursday that current tax loopholes give online-only retailers "a 7 percent price advantage."

The governor said the idea of collecting sales tax on e-commerce has not yet been "fully vetted," but other states, including Indiana, have sought to collect from Internet retailers.

This week, Indiana Gov. Mitch Daniels announced a deal with for the retailer to collect and remit sales taxes to the state.

Still, Deal is not placing any bets that lawmakers in Georgia might get aggressive on the subject this year.

"It very well could be one that we might see some action on, but I would not predict one way or the other at this point."