On March 26, 2010, the Georgia Senate overwhelmingly passed S.B. 512, which provides the State Revenue Commissioner with the discretion to engage contractors on a contingency-fee basis to collect sales and use taxes. Specifically, the bill authorizes the Commissioner “to provide for the collection of uncollected sales and use taxes that businesses may otherwise not be obligated to collect and remit which have not been previously collected or remitted.” Under the bill, such “bounty hunter” contractors may only be compensated on a commission or contingency- fee basis.
Thus far, this bill has flown under the radar, which is somewhat curious given that the House recently passed H.B. 1221, which incorporates many of the provisions from the Streamlined Sales and Use Tax Agreement, including a provision allowing out-of-state catalog and Internet retailers to comply voluntarily with sales and use tax collection. It becomes even more curious considering the prior statements by the current Commissioner and the prior ruling of the Georgia Supreme Court regarding contingency-fee auditors. The State Revenue Commissioner, Bart Graham, has been outspoken about contingency- fee auditors and has written several letters to the editor of The Atlanta Journal- Constitution, including a September 2009 letter rejecting the idea of using contingency- fee auditors. Specifically, Commissioner Graham stated that “allowing collection based upon a profit motive rather than sound tax law and regulation would ensure that taxpayers would be disadvantaged.” Additionally in 1991, the Georgia Supreme Court held that a contract with a contingency-fee auditor was void as against public policy because of the contingency scheme of compensation for those services. Sears, Roebuck and Co. v. Parsons, 401 S.E.2d 4 (Ga. 1991). The bill is currently under consideration in the House Ways and Means Committee.