Online tax bill has passed California Legislature

[SoCalDem]

http://www.mysanantonio.com/news/article/Online-tax-bill-has-passed-California-Legislature-1430766.php

Online tax bill has passed California Legislature
Published 11:06 a.m., Sunday, June 19, 2011

SACRAMENTO, Calif. (AP) — California lawmakers have passed a bill to force out-of-state Internet retailers such as Amazon.com to collect taxes under two different legal theories, both of which have been criticized by online sellers. The online tax bill combines elements of other bills introduced this legislative session. Supporters expect it to bring in $200 million or more per year, $83 million from Amazon alone.

The bill, ABX1-28, was approved last week as part of a Democratic package to meet California's budget deadline. Gov. Jerry Brown promptly vetoed the main budget bills, but others, including the online tax bill, were passed but not sent to the governor. The intent is to capture some of the estimated $1.1 billion California is owed each year in "use tax" but never collects.

The use tax is charged on purchases from out-of-state sellers for goods to be used in California. It is levied at the same 8.25 percent rate as the base state and local sales tax. California retailers must collect sales tax, but customers are expected to report and pay use tax directly to the state. Many don't.

snip

The tax legislation adds several new ways to define a nexus for tax collection. One approach requires online sellers to collect tax if they have affiliates in California that refer shoppers to their site. Similar efforts in other states generated opposition because online retailers responded by severing relationships with in-state affiliates, often small businesses. Amazon has said it would do the same in California.

In a more novel approach, the bill requires an online retailer to collect the tax if it has sister companies in California, such as a marketing arm or product developer. Even backers of that approach expect it will be challenged in court if approved.

[Sherman A1]

1. This will be interesting.

ALthough I understand the needs of the state for a revenue stream and leveling the playing field for brick & mortars retailers, I just don't see this moving forward too quickly. Amazon, will cut it's relationships with in-state associates & I suspect stop shipping to CA addresses if necessary.

I expect them to play hardball.

[SoCalDem]

3. This whole thing irks the HELL out of me..

Do people pay sales taxes in their home states when they shop on vacation?..

If I choose to buy a used Hartmann briefcase from a guy in Ohio, why the HELL should CA expect to collect sales tax?

I DID find that glorious briefcase just the other night:)

[NutmegYankee]

6. Some states require you to pay taxes on products bought in other states.

Lets say I drive a hour to Providence, RI and buy a Blu-ray player. Connecticut's use tax requires that I pay the state sales tax for it if I bring it back to Connecticut. I only owe the difference above the other states' tax, which makes buying a device in RI moot since their sales tax is higher. But if I bought it in Delaware, I'd owe 6% of the purchase price, which is required to be paid when I file my state taxes. There are of course exceptions, such as purchases below $20 being exempt and food and up to $50 of clothing being exempt.

[customerserviceguy]

8. I don't seem to recall border inspection stations in CT

so I would imagine most people don't bother paying the tax.

[Luminous Animal]

11. Most individuals don't. But it is illegal not to and the tax collector does have the right

to audit your purchases.

[customerserviceguy]

13. Theoretically, yes

But as a practical matter, would a tax collector come to your home, and demand to see a CT receipt for every item he finds there?

As for "illegal", well, it's illegal to talk on a cell phone held to your head in NY, but there is no real enforcement of it. A law without consequences and an enforcement mechanism is merely a suggestion.

[NutmegYankee]

16. Few pay it.

Practically, it's useless for Conn. because the surrounding states have higher sales taxes. But web transactions are still an open field.

[customerserviceguy]

17. I do remember being in NH in the parking lot of a liquor store

and seeing quite a few CT license plates (and a BUNCH of MA ones) there. Of course, our car was clinking on the way home, as well.

[NutmegYankee]

18. That's usually Rhode Island on a Sunday.

We just can't seem to ditch the Sunday Blue law.

[customerserviceguy]

20. Good point

I've lived on this coast for a bit more than four years now, and as I travel up and down the Atlantic seaboard and observe the laws relating to the sales of alcohol, it really seems like Prohibition just ended here five or ten years ago.

I liked being able to buy beer and wine in the grocery stores in the Pacific Northwest, the only times sales were stopped were at what most folks would consider the very middle of the night. If you had a frequent shopper card, you could get some pretty sizable discounts on your beer and wine, and not just the icky stuff, either.

Every time my lady and I go back to the NW, we always have that first stop at a supermarket after we get off the plane. She knows that after she's done shopping, she can go to the beer aisle and find me weeping.

[NutmegYankee]

22. "The Land of Steady Habits"

:beer:

[customerserviceguy]

25. Ha!

Yes, that matches my few forays into Connecticut!

I do hope to do some more touring there in the fall, it's quite beautiful in many, many places. But I need to make sure I have a goodly supply of microbrew in the cooler before setting off. That Hooker IPA they make in CT is quite tasty.

[slackmaster]

31. The only people who pay it are prominent ones like Sanator John Kerry

When their major personal purchases (e.g. yachts) made outside of their home states are made public.

Most people are quite unaware of use tax laws.

[Luminous Animal]

10. Actually, it is the law. You are supposed to report such purposes and pay the sales tax.

Most individuals do not (except on items like cars that one can't hide from the state). But businesses routinely report out of state purchases because it is one of the 1st things that the State Board of Equalization looks for when conducting an audit.


FYI, the winery that I work for must obtain a retail license in every state that we ship to and we are required to collect and pay the sales tax. Why should any other retailer be exempt?

[customerserviceguy]

14. Yes, I guess auditing businesses would indeed pay off

But they're going to have a devil of a time with consumers.

The problem your employer has is that it's in the wine business, which is tightly regulated. For some reason, enforcement actions against "demon rum" (or whatever the MADD types call it these days) are countenanced, while those directed at purchases of things thought to be more benign are suspect of being a bit totalitarian.

[slackmaster]

32. I've seen businesses go out of their way to avoid paying use tax

For example, having a major shipment of computer equipment delivered to a relative's warehouse in Oregon and driving it into California in a rented truck.

[customerserviceguy]

38. No doubt that's what CT had in mind when it adopted it's stance on user taxes

It seems reasonable to go after large targets that are less sympathetic than ordinary folks.

[customerserviceguy]

7. Yes, when Californians realize that they have to gas up the SUV

and drive to the mall (where they won't find a parking spot) because they can't order a book off of Amazon, they'll demand that this bill gets overturned.

Amazon might have been a frill twenty years ago, but it's now ingrained as a part of everyday life for many people, and they know they can get away with playing hardball.

[SoCalDem]

36. not only haviing to GO somewhere to buy the "whatever", but

having to wander around trying to find a salesperson to check you out & having to ask for help from people who don;t know what they sell or where it is, or ignore you totally..

I like to shop online in the middle of the night.. I order stuff and it comes right to my front door..

I would pay a tax if it was part of the price, but why should I have to save receipts and total them up & pay taxes to CA, when I ordered it online & paid postage to have it shipped from "wherever"?

My latest find was a pristine-condition Hartmann briefcase for my husband for $185.00 (the brand new version sells for $1250.00) He had one decades ago (it was given to him by his boss), and he's always wanted another one. there is NO way we could afford one & then I googled & found one just like he had.. Why should CA get 8.25% ? It's an online garage sale..

What should happen is for a 10% "tax" to be levied on all purchased made with credit card/paypal/debitcard for online purchased.. 5% to delivery state 5% to origination state.. everyone wins.. if the purchase & delivery are within the same state, the regular tax would apply.. It would be easy, and 10% should not be a deal-breaker for the convenience of shopping online.

[Le Taz Hot]

37. Amazon pulling out of California would be

an incredibly stupid thing to do. There's almost 34 million of us. You think we can't find an alternative to Amazon? :rofl:

[NutmegYankee]

2. Say goodbye to the local affiliates of major websites.

Amazon and Overstock.com severed all ties in my state (Connecticut) after we passed a similar law.

[SoCalDem]

4. So you cannot order from them?

:shrug:

[NutmegYankee]

5. Not from the local affiliates.

http://money.howstuffworks.com/affiliate-program1.htm

The companies that were using amazon to sell products in the state have to start over.

[customerserviceguy]

12. That will have the effect of driving prices up, as suppliers are reduced,

benefitting merchants in states that don't try this sort of strongarm tactic. It might even be a reason to relocate a business to a state that doesn't do this, such as one of the non-sales tax states.

[WillowTree]

26. They'll do the same to their Illinois affiliates, as well.

[customerserviceguy]

9. Here's a novel idea

Just accept the fact that some things have become nearly impossible to tax, such as online interstate sales. Exempt the items being sold from sales tax, and make it up on something considerable harder to evade, such as auto sales taxes. That creates a level playing field for the brick and mortar stores, and doesn't tie up your state tax bureaucracy.

[Lordquinton]

19. "such as auto sales taxes"

No. How about reinstating taxes on people who aren't paying them, yet could fund a school district for a year out of pocket? Online taxes and auto taxes gouge those already paying way too much and making way too little. And no, cars are not a luxury, or "Driving is a privilege" they are a necessity of modern day life.

[customerserviceguy]

21. Which taxes are you talking about reinstating? Income taxes?

I agree that driving is a part of everyday life, but being as each car has a license plate on it, it's damned difficult to evade taxes on that auto, if it's parked every night in a driveway in a state that doesn't match the state that issued the plate.

Another kind of tax that's tough to evade is property tax, and as a side benefit, such tax records are public, we can all know it if someone is getting a sweetheart deal from the local tax assessor.

Income taxes, on the other hand, are completely secret. You could have two neighbors living side-by-side, working the same job for the same pay, and they might well have different income tax amounts, based on how they live their lives around the tax code. And neither of them would know what the other was paying, unless they truthfully talked about it.

[Warren DeMontague]

15. If only there were some OTHER way for CA to raise tax revenue.. say, an extremely popular product

currently illegal, unregulated, and un-taxed.


Hmmmmm.

[MadHound]

24. Or even if they would revoke Prop. 13

But naah, can't have people paying their property taxes now, can we.

[slackmaster]

30. That would result in many people getting literally taxed out of house and home

Proposition 13 has a major flaw but it was passed for a very good and noble reason. The underlying problem that led to it being placed on the ballot in 1978 - A propensity of some county governments to indulge in out-of-control spending - is still there.

I voted for it then, and if given the choice of leaving it intact or repealing the whole thing I'd have to go with the former.

If you want to propose something more reasonable that has a chance of seeing the light of day, I might be receptive to a modification that would make it more difficult for people who acquire commercial property to avoid having it reassessed. But when you propose throwing the baby out with the bathwater you should not be surprised if you alienate a solid majority of California voters including people who rent their homes.

[Warren DeMontague]

35. Or, if there were some highly profitable product that comprises a $20 Billion underground economy

that, by being legal, could not only generate large amounts of tax revenue, but could also save the state massive amounts of money in terms of law enforcement, equipment, and incarceration.

Oh, I know. Crazy talk.

[taught_me_patience]

23. Finally

It's nice to see the playing field leveled a bit between brick and mortar and internet. Let's see how internet sales fare when they don't have a built in 10% price advantage.

[csziggy]

27. State by state sales taxes on internet sales are impractical

Because it is absurd to require smaller internet vendors to keep track of and report taxes for all states. Heck, in Florida, each county can add on extra sales taxes so each county can be different!

But it is past time for internet vendors to lose the advantage of no sales taxes. Too many local businesses just cannot compete with that advantage, especially specialty type stores.

Maybe there should be a federal sales tax for internet sales?

[Sherman A1]

28. You have a point there.

it is time for internet sales to lose their advantage over brick & mortars for many reasons (one being those are real jobs that employ real people in your local community). That said state by state collection is probably absurd. A national collection of a fixed rate may be the answer, with the proceeds distributed to the states via block grants or some such method.

[csziggy]

34. I started to make a comment about how the federal internet tax

Could be distributed, but I'm not sure how well it would work. Here is my thought, though: use the federal internet tax to offset the costs of some of the federally mandated programs. That would reduce the states willingness to cut those programs, especially if receiving that money was dependent on keeping those programs open.

That would reduce the screaming that will happen if the federal government takes over one aspect of taxation that states normally do. The money would still go back to the states for use, but the use would be directed equally by all the states.

[slackmaster]

33. Maybe the real problem lies with states that have absurdly high sales tax rates

Such as California. With a statewide base rate of 8.25% and many localities tacking on their own of as much as a full 1%, the incentive to avoid paying sales tax motivates a lot of online purchases.

http://www.boe.ca.gov/sutax/pam71.htm

http://www.boe.ca.gov/sutax/pdf/districtratelist.pdf

I'm certainly not going to drive to National City to make a $1,000 purchase when it adds $5 to the cost that I'd pay almost anywhere else in San Diego County.

Sales taxes make up for about 1/4 of the state's revenue, but sending business to other states hurts the employment situation, which in turn cuts income tax revenue (which is the source of the majority of state revenue.)

[slackmaster]

29. That will make it cost-effective for Californians to drive to other states for large purchases

Heckuvajob, legislators.