Revenue and finance issues are likely to play a prominent role once again as legislators prepare to meet for the Georgia General Assembly’s 2021 legislative session. With the unique challenges presented through the year, these issues are set to be more important than ever. The impact of the coronavirus drastically decreased tax revenue collections across the state for much of 2020 as Georgians faced unemployment and decreases in spending and travel.
Fortunately, sales tax, one of the largest sources of revenue for the state and local governments, was partially assisted by the implementation of the “marketplace facilitator” legislation, requiring the collection of sales tax on transactions occurring through online marketplaces. As Georgians adjusted their spending habits, purchasing more products over the internet, these popular online marketplaces collecting sales tax helped the financial outlook of the state and local governments. While tax revenue from many sources has relatively stabilized in recent months, these issues are likely to still be on the forefront as legislators reconvene.
Many individuals and businesses are still experiencing the negative financial impact of the coronavirus. Small businesses in particular continue to struggle to keep their doors open while sales decrease. When the legislature meets, there will certainly be a focus on providing relief and aid to those sectors that continue to be negatively impacted by coronavirus. Efforts by the legislature to provide relief to small businesses must consider the potential impact on local government.
“While there will be well intentioned interest in assisting small business across the state, this relief should not come at the expense of local government revenue streams already negatively impacted by the virus,” said Ryan Bowersox, GMA’s governmental relations associate covering municipal taxation issues under the Gold Dome.
It is crucial that the revenue sources relied upon by local governments are not only protected but strengthened to ensure continued funding of vital services. As local governments continue to rely heavily on sales tax revenue, portions of the sales tax code can be modernized to effectively capture all eligible sales. Further efforts to modernize portions of the sales tax code to reflect new technology are once again likely to be discussed through the legislative session.
It is expected that the legislature will consider lodging facilitator legislation requiring online short-term rental providers to be responsible for collecting the state and local hotel-motel fees. As consumers continue to replace traditional hotel and motel stays with rentals found on popular online platforms such as Airbnb and VRBO, this potential change in law would provide additional revenue to the state and local governments, and help avoid existing confusion concerning which party in the transaction is responsible for required taxes. This legislation would also be crucial in helping to level the playing field as traditional brick and mortar hotels and motels compete with the new alternative platforms.
This story originally appeared in the January/February 2021 edition of Georgia’s Cities magazine.