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March 28th, 2009, 03:24 PM #1
Assembly Bill 178 - E-Fairness
- Join Date
- March 28th, 2009
If you visit Nancy Skinner's (a sponsor of the bill) you'll notice that Assembly Bill 178 is called "E-Fairness"
This bill provides a level playing field to ensure that California businesses, both brick and mortar and e-commerce, do not face an unfair competitive disadvantage against out-of-state internet retailers.
Assemblymember Nancy Skinner announces legislation to close tax loophole and bring much needed revenue to California.
Legislation will require out-of-state companies doing business in California to collect sales and use taxes required by law.
SACRAMENTO, CA - Assemblymember Nancy Skinner (D–Berkeley) announced today that she has introduced Assembly Bill 178, legislation that will ensure that California receives its share of sales and use tax revenue from out of state companies leveling the playing field for California’s brick and mortar businesses.
AB 178 would provide that out-of-state companies which maintain a network in California and thus have a presence in the state would therefore be required to collect sales tax on orders received from within California. New York passed a similar law, and was sued by Amazon.com. The New York Supreme Court dismissed Amazon’s claim, based on an extensive body of legal decisions defining the nature of nexus and upheld New York’s right to levy the sales tax.
“This legislation will close the current loophole in California tax law which has allowed out-of-state companies to avoid collecting California sales and use tax,” said Assemblymember Nancy Skinner (D – Berkeley). “During this unprecedented fiscal crisis we cannot afford to lose sales tax revenue from out-of-state companies when our own local businesses are struggling to keep their doors open.”
AB 178 is modeled closely after the New York law and written to conform to the recent New York Supreme Court decision. These taxes are due and payable as use tax, the issue raised in the bill is the point of collection, not the amount of tax owed. The bill exempts businesses doing less than $10,000 in business in the state. AB 178 is expected to raise approximately $55 million in revenue per year.
“This bill helps preserve businesses and jobs in our communities,” said Hut Landon of the Northern California Independent Booksellers Association. “Independent booksellers have been hammered by unfair tax competition from Amazon for over a decade. And as Amazon has expanded its retail reach, more and more locally-owned businesses are faced with unfair competition. We welcome this effort to level the playing field for all retailers.”
AB 178 is joint-authored by Assemblyman Charles Calderon (D – Montebello) who chairs the Assembly Revenue and Taxation committee.
March 28th, 2009, 05:01 PM #2
Our job then becomes to show the loss of affiliate-income tax revenue and lower affiliate spending sales tax revenue would surpass that $55 million figure.
March 28th, 2009, 05:23 PM #3
- Join Date
- January 18th, 2005
Welcome to ABW. I think we've all seen Ms. Skinner's press release before (I think it was posted here in an earlier discussion).
FYI, when you join a new discussion forum, you should usually "introduce yourself" so that other folks know who you are and why they should listen to what you say. I'm quite likely to view your comments very differently if you are a legislative staffer, a lobbyist, a local bookstore owner, an online merchant, or a web publisher. (There is a special forum here to use to "introduce yourself." Note that you cannot post affiliate links or links to affiliate sites in most sections of this site.)
Nobody is opposed to fairness, of course. After reading hundreds of discussion threads here on ABW and talking with many dozens of merchants and web publishers, I think most folks (affiliates, merchants, and others) agree that sales tax ought to be collected fairly for all transactions. There should not be any "internet-only" taxes, nor should internet transactions be exempt from regular sales taxes.
But this is NOT an "e-Fairness" bill or law; as proven in New York, this is simply a facially unconstitutional "trick" intended to force one company (Amazon.com) to begin collecting sales taxes, while forcing hundreds of other merchants to end their business relationships with state residents.
Unfortunately, apart from Amazon.com, the primary impact of this bill (if enacted) will be to terminate out-of-state merchants' advertising in California-based publications, including web sites. (It's unclear whether Amazon will terminate its advertising in California; it did not do so in New York, where it instead chose to collect sales taxes; it has announced that if Hawaii enacts a similar law, it will terminate its "associate" relationships with all Hawaii residents.)
Most merchants simply cannot handle the burden of collecting complex sales taxes from multiple states that have a wide range of different tax rules and different tax rates in different areas of the state. This was the reason why the U.S. Supreme Court ruled in 1985 that out-of-state companies cannot be forced to collect sales taxes unless they have a "physical presence" in the state. The U.S. Supreme Court even provided exceptionally detailed guidance about what states could do to be able to require sales-tax collection by out-of-state merchants.
This is NOT about fairness. If enacted, this law will still not require MOST out-of-state merchants to collect sales tax; instead, it will attempt to impose sales-tax-collection duties only on a small group of small and mid-size merchants based solely on their willingness to maintain advertising relationships with California residents. These out-of-state merchants would be punished for doing business with California publications -- and of course, this means that many of these businesses will stop advertising in California publications. How is that fair to anyone? How is that fair to California residents who lose their income?
Based on what happened in New York, I expect hundreds of merchants to terminate their relationships with California web publishers; this will shift many millions of dollars in advertising payments from California to other states. A few merchants will begin collecting sales tax, which will offset a portion of the income taxes lost (if I lose 25% to 50% of my advertising income because of this law, I'll probably pay 30% to 60% less in California income taxes).
March 28th, 2009, 08:14 PM #4
- Join Date
- March 28th, 2009
Thanks for your reply.
Originally Posted by markwelch
With a $42B deficit it really might be time to move out of state.
Originally Posted by markwelch
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