Lawmakers Eye Potential $300 Million Sales Tax Windfall

By Aaron Gould Sheinin
The Atlanta Journal-Constitution
February 10, 2010

Georgia could potentially see a $300 million-a-year boost to state revenues through tighter controls over sales tax collections under legislation being proposed in the House.

Ways and Means Chairman Larry O'Neal (R-Bonaire) and Vice Chair David Knight (R-Griffin) have introduced legislation that would allow the state to identify businesses that have local licenses to operate but do not pay sales taxes to the state. It's a simple-sounding prospect that O'Neal said he believes could conservatively return $100 million to state coffers "and it could be two to three times that. That's my estimation."

Not only would the program be a boon to dusty state coffers, but the cost to taxpayers would be minimal, and local governments could see a significant benefit as well. Sales taxes would not be raised under this plan. O'Neal said his committee will propose an $8 million bump in funding for the state Department of Revenue to hire additional auditors and investigators and less than $100,000 for computer programming to run the comparisons between sales tax records and local business license filings.

The confidence O'Neal and Knight have in the idea stems from an ongoing pilot program in Hall County that found nearly 1,000 businesses in that single North Georgia county that did not have sales tax numbers, meaning those businesses were not properly collecting or reporting sales tax collections to the state. Another 600-plus businesses were found not to have a license from the county or local government.

An alternate proposal by Democrats, led by House Minority Leader DuBose Porter (D-Dublin), a candidate for governor, was introduced in the House on Tuesday, although how it differs from the O'Neal-Knight plan is not entirely clear. The Democrats' bill was not immediately available for comparison, but Porter said the Republicans' bill "only goes halfway. It wouldn't get the job done that has to be done."

Porter, who last year proposed improvements to the sales tax collection system, has said there is potentially $1 billion in unreported and uncollected sales taxes in Georgia, a figure blistered as "nonsensical" by Revenue Commissioner Bart Graham.

Still, both Porter and O'Neal and Knight say their plans will replicate the pilot program across the state. Both sides agree that there are potentially thousands of businesses that are not correctly collecting and/or reporting sales tax collections to the state, and both sides also agree that they want to "find ways to generate more revenue without raising taxes," as Rep. Virgil Fludd (D-Tyrone) put it.

Knight said his bill has the support of retailers and the National Federation of Independent Business. The Georgia Municipal Association supports both bills, spokeswoman Amy Henderson said. "We're on board with any plan that gets to full compliance with sales tax collections," she said.

And no wonder: Local governments are entitled to as much as half of what's collected in sales taxes. When businesses don't collect sales taxes or collect them but keep them instead of sending them to the state, local governments lose out as well.

The bills' differences would appear to come on who gives information to whom and who does what with it. The Republican plan would have the counties send data to the state, and the state would compare that to its records and then work with local officials to crack down on scofflaws.

Democrats would require Revenue Department officials to give information to local governments as well, something Graham said is a no-no under state privacy laws.

"In the administration of tax, I cannot tell you about somebody else," Graham said. "I can't tell you if they file returns or not. I can't tell you their phone number. They have to start changing the confidentiality laws."

Democrats, however, argue it shouldn't violate anyone's privacy to send local governments a list of businesses in their jurisdiction that have registered to pay sales taxes.

But Graham said the attorney general has advised him against that.

Regardless, Graham is pleased that anyone is paying attention.

"After six years, I"m astronomically grateful that someone other than the governor and Larry O'Neal, David Knight and [Senate Finance Chairman] Ronnie Chance [R-Tyrone] have now taken an interest in tax compliance," said Graham, who said Porter "has never once written me or contacted me to discuss what we can do and how we can do it better."

http://www.ajc.com/news/georgia-politics-elections/lawmakers-eye-potential-300-295246.html

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