Ever since the Internet became a shopper paradise - no screaming children, parking woes, and bad Christmas music - there has been a public policy issue that has raised its ugly head time and time again: how to collect sales taxes on purchases made by a resident of Georgia from an Internet site located in Texas by a company based in California and shipped out of a warehouse in Kentucky.

The Internet retailers complain, rightly so, that it is next to impossible for a small shop to keep up and remit taxes to the several thousand different taxing jurisdictions (state/county/city) in the US. Local and state governments on the other hand have tried several heavy handed, and ultimately unsuccessful attempts to collect the money they believe is theirs.

Part of the problem with finding a solution to the Internet sales tax collection issue has been rent-seeking on the part of the brick and mortar retailers. Department stores don’t want people shopping online and those retailers, being more established, have better lobbying ability. Brick and mortar retailers want the government to screw over the Internet retailers because they don’t want the competition.

With the Georgia General Assembly looking at scrapping the income tax with a sales tax increase, the issue of Internet sales will become more of a concern.

Should the General Assembly decide to go down that path, this would be an excellent time for Georgia to become a model for a sane and workable Internet taxing system that doesn’t burden small Internet retailers. Instead of 159 different county rates (plus whatever SPLOSTs and city sales taxes might also exist), Georgia could establish a single state-wide Internet Sales Tax rate. All a retailer would have to do is send the Dept of Revenue a spreadsheet of the Zip+4 and the purchase amount. The DOR would then be responsible for apportioning the sales tax revenue between the counties and state based on a fixed formula.

Internet retailers would send this spreadsheet, along with a check, on a monthly, quarterly, or annual basis depending on transaction volume. So an Amazon with millions of dollars of annual sales might send a check monthly, but a small mom-and-pop shop that might sell $15,000 in Georgia would only have to send a check once a year.

So as not to ensnare individuals into having to collect and remit Internet sales taxes, all retailers would be exempt on the first $5,000 of purchases each year. Companies like Amazon would exceed that by about 9am on Jan 1st as gift certificates are redeemed, while someone selling that old couch on Craigslist would never be subject to having to collect and remit the Internet sales tax.