Proposing to significantly overhaul Georgia’s tax code, including an interesting attempt to eliminate sales tax exemptions for “Holy Bibles” and Girl Scout Cookies, H.B. 385 was introduced on February 24. The 127-page bill is intended to be revenue neutral and largely mirrors the recommendations of the Special Council on Tax Reform and Fairness for Georgians (the Council) (see Sutherland Legal Alert, January 10, 2011 for detailed coverage of the Council’s report). H.B. 385 would eliminate most sales tax exemptions and subject certain services to tax, reduce or eliminate most income tax credits and personal deductions, phase in lower personal and corporate income tax rates, and implement a communications services tax. The bill, introduced by the Special Joint Committee on Georgia Revenue Structure (the Committee), is expected to be amended while still in Committee, but will then require an up or down vote when introduced to both houses of the Legislature.
The bill would dramatically alter the sales tax landscape by eliminating over time the majority of the existing 110 exemptions. In a step that could raise political hurdles for the enactment of the bill, exemptions on the chopping block include everything from sales of groceries, Holy Bibles, church steeple bells, school lunches and Girl Scout Cookies (No! Don’t tax my Thin Mints!). The sales tax base would be expanded to include software and digital goods and a variety of household and automotive services. The bill follows through on the Council’s stated purpose of reducing taxes on business inputs by retaining input exemptions for the agricultural and manufacturing industries, while additionally exempting energy used in manufacturing. Revenue raised from the expansion of the sales tax base presumably offsets the reduction in the corporate and personal income tax rates from 6% to 4%, to be phased in by 2014.
H.B. 385 proposes to exempt all communications services from the sales tax and, instead, impose a new statewide Communications Services Tax (CST). The CST would be imposed on all telecommunications, ancillary services, and video programming services.