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July 1st, 2009, 03:15 PM #1
Google, eBay, and CJ: "Nexus" issues
- Join Date
- January 18th, 2005
After New York enacted its "Amazon Tax," the tax agency there adopted a very narrow interpretation of the law.
If California enacts the "Amazon Tax," we would all hope that the Board of Equalization would adopt a similar narrow interpretation of the statute. However, there's no guarantee of this, and therefore we can't be certain that the law won't be enforced much more broadly.
Since Google, eBay, and CJ are all California companies which receive compensation for referring California customers to out-of-state merchants, the concern would be whether any out-of-state merchant who ships orders meeting the statutory threshhold would be required to collect California sales tax because they use:
- Google's AdWords program,
- ValueClick's PPC advertising network,
- eBay's marketplace,
- Google Affiliate Network,
- Commission Junction,
- and/or hundreds of other marketing intermediaries which have employees in California.
For that matter, a literal reading of the law might also capture merchants who hire California advertising agencies, or who advertise in California newspapers or TV stations, or in California-based magazines.
It's not entirely clear why New York's tax agency interpreted the law so narrowly. Perhaps there is something in the legislative history that declares that only percentage-of-sale advertising is included, or that in-state intermediaries (like LinkShare) aren't included. (In California, no committee hearing was ever held on this bill; the author dropped the bill from hearing after acknowledging flaws and promising to amend the bill, but the original language is still in the current budget bill). Or perhaps the New York agency chose a narrow interpretation in order to limit the challenge to the U.S. Supreme Court's precedents, or to avoid infringing on First Amendment rights of a subset of publishers.
I hope that the "Amazon Tax" is dropped from the budget bill. But if California enacts this unconstitutional law, I hope that the Board of Equalization will choose to interpret the law "no more broadly than New York's tax agency" (perhaps even adopting the exact same guidelines as New York). But if it does not, where might the line be drawn?
And what might be the effects of a broader interpretation of the law? Might out-of-state companies fire or relocate their California employees to avoid the law? Could the Board of Equalization issue a subpoena compelling CJ to disclose an out-of-state merchant's sales data, or ordering Google to disclose the AdWords and Analytics spending and conversion and data for specific out-of-state merchants?
Last edited by markwelch; July 1st, 2009 at 03:45 PM.
July 1st, 2009, 04:08 PM #2
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