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  1. #1
    ABW Ambassador CathyM's Avatar
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    May 30th, 2006
    Torrance, CA
    AB 178 Bill Analysis Posted
    This was posted yesterday for the hearing on Monday.

  2. #2
    Join Date
    January 18th, 2005
    The analysis is lengthy, but essentially just regurgitates the statements of the bill's authors, supporters, and opponents, without any objective analysis.

    Most important, the "impression" left by the analysis is that the New York law will be upheld by courts (which I believe is absolutely implausible).

    The analysis also essentially ignores the issue that the use of commission-based "marketplaces" (like eBay) would trigger the sales-tax collection requirement for thousands of merchants.

    There is no discussion whatsoever of the New York tax agency's extremely narrow interpretation of their law; nor is there any mention of the likelihood that Amazon will refuse to collect sales tax for California even if the law is enacted.

    Here's what I think are the most important passages:
    "Proponents state: . . . Significantly, Amazon began collecting use tax immediately for orders from New York residents, and, since this tax is due and payable in any case, the only possible adverse outcome for the state in the unlikely event that the state loses would be that Amazon would be relieved of its collection obligation in the future."

    "BOE estimates that this bill would generate $149.5 million annually...." [BOE = California State Board of Equalization]

    "The author states: ... New York has collected over $40 million dollars in tax revenue to date and expects to collect approximately $70 million by the end of the year. The Board of Equalization estimates that California would collect over $150 million if AB 178 were enacted."
    Regrettably, the first quoted paragraph is probably the single most important passage in the entire analysis: it asserts that if the law is enacted, California will receive $150 million more in annual sales tax revenue, and even if the law is ruled unconstitutional, the state gets to keep that money.

    I don't know if the $150 million figure is reasonable; I don't know whether Amazon will start collecting tax if the law passes. But it's certainly a gamble that will sound very attractive to legislators.

    "It is Committee staff's understanding that affiliates engage in a wide range of activities. Some maintain websites that contain links to out-of-state retailers. Others engage in more active e-mail solicitation. Under this bill, any business that uses affiliates to generate substantial sales to California residents would be deemed to have a physical presence in this state. . . . Committee staff understands that the author is working on amendments . . . "
    The analyst's comments refer repeatedly to "affiliates" even though that word doesn't appear in the text of the bill; unless the bill is amended to focus exclusively on commission-based affiliate-program arrangements, the analyst's description of the bill's impact is completely wrong.

    But for legislators, it's probably an easy decision: the promise of $150 million in new sales-tax revenue this year, versus unknowable income-tax losses next year, plus potential nominal costs of consitutional litigation.
    Last edited by markwelch; April 25th, 2009 at 01:36 PM.

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