Unregistred Business Identification-Georgia’s New Approach

By June 15, 2010 Uncategorized

Georgia House Bill 1093 was signed into law recently.  This bill is in response to some legislators’ belief that tens of millions of tax dollars are going uncollected in Georgia because of unregistered state domiciled businesses.  In an effort to cooperate with the local governments, the state is now requiring that each city and county that has a local business tax ordinance to gather and submit additional information to the Georgia Department of Revenue.  The goal is to identify businesses that are registered for business tax that should also be registered for collection and remittance of sales tax.

During the hearings, someone legislators speculated that over $300 million of sales tax was going uncollected because of unregistered local businesses and that if the counties and cities would help identify these law breakers, there would be a windfall for them also.  If you do the math, at 7% sales tax rate that is over $4 billion in untaxed but taxable revenue.  I have serious doubts that this is a legitimate number.

The bill requires that the municipalities gather the following information from taxpayers:

1. Name and address
2. Sales tax ID if one exists and if the business is required to have an ID

The municipality then will submit this information to the Georgia DOR.  That’s it.

The bill does not require any action on the part of the DOR.  There is no call to action once the data arrives or any mention as to what follow up steps the state or the municipality will take.  There is no matching required to take place to ensure that the unregistered businesses actually register.  Nothing.

This bill also dodges the biggest problem completely.  It assumes that the business knows whether it is required to have a sales tax ID.  If the business is required to have an ID but does not know it has such a responsibilty, what good is this program?

Ned Lenhart
President of Sales Tax Advisors of Georgia
Georgia Tax Enforcement