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January 19th, 2011, 03:02 PM #1AB 153 - Introduced in CA on 1/18
I've lost track of which round of this we're on, but here we go again...
California Assembly Member Nancy Skinner (D-Berkley) reintroduced what they are calling "E-Fairness Legislation" but we all know this is the same old advertising tax aimed squarely at our industry.
Her Press Release:
January 18, 2011 - MEDIA ADVISORY: Assemblymember Nancy Skinner Introduces E-Fairness Legislation To Level The Playing Field For California Businesses
Sacramento Bee Article:
Capitol Alert: AM Alert: 'Amazon bill' is back
AB 153 Assembly Bill - INTRODUCED
BILL NUMBER: AB 153 INTRODUCED
INTRODUCED BY Assembly Member Skinner
JANUARY 18, 2011
An act to amend Section 6203 of the Revenue and Taxation Code,
relating to taxation.
LEGISLATIVE COUNSEL'S DIGEST
AB 153, as introduced, Skinner. State Board of Equalization:
administration: retailer engaged in business in this state.
The Sales and Use Tax Law imposes a tax on retailers measured by
the gross receipts from the sale of tangible personal property sold
at retail in this state, or on the storage, use, or other consumption
in this state of tangible personal property purchased from a
retailer for storage, use, or other consumption in this state,
measured by sales price. That law defines a "retailer engaged in
business in this state" to include retailers that engage in specified
activities in this state and requires every retailer engaged in
business in this state and making sales of tangible personal property
for storage, use, or other consumption in this state to register
with the State Board of Equalization and to collect the tax from the
purchaser and remit it to the board.
This bill would include in the definition of a retailer engaged in
business in this state any retailer entering into agreements under
which a person in this state, for a commission or other
consideration, directly or indirectly refers potential purchasers,
whether by an Internet-based link or an Internet Web site, or
otherwise, to the retailer, provided the total cumulative sales price
from all sales by the retailer to purchasers in this state that are
referred pursuant to these agreements is in excess of $10,000 within
the preceding 12 months, except as specified. This bill would further
provide that a retailer entering specified agreements to purchase
advertising is not a retailer engaged in business in this state.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 6203 of the Revenue and Taxation Code is
amended to read:
6203. (a) Except as provided by Sections 6292 and 6293, every
retailer engaged in business in this state and making sales of
tangible personal property for storage, use, or other consumption in
this state, not exempted under Chapter 3.5 (commencing with Section
6271) or Chapter 4 (commencing with Section 6351), shall, at the time
of making the sales or, if the storage, use, or other consumption of
the tangible personal property is not then taxable hereunder, at the
time the storage, use, or other consumption becomes taxable, collect
the tax from the purchaser and give to the purchaser a receipt
therefor in the manner and form prescribed by the board.
(b) As respects leases constituting sales of tangible personal
property, the tax shall be collected from the lessee at the time
amounts are paid by the lessee under the lease.
(c) "Retailer engaged in business in this state" as used in this
section and Section 6202 means and includes any of the following:
(1) Any retailer maintaining, occupying, or using, permanently or
temporarily, directly or indirectly, or through a subsidiary, or
agent, by whatever name called, an office, place of distribution,
sales or sample room or place, warehouse or storage place, or other
place of business.
(2) Any retailer having any representative, agent, salesperson,
canvasser, independent contractor, or solicitor operating in this
state under the authority of the retailer or its subsidiary for the
purpose of selling, delivering, installing, assembling, or the taking
of orders for any tangible personal property.
(3) As respects a lease, any retailer deriving rentals from a
lease of tangible personal property situated in this state.
(4) (A) Any retailer soliciting orders for tangible personal
property by mail if the solicitations are substantial and recurring
and if the retailer benefits from any banking, financing, debt
collection, telecommunication, or marketing activities occurring in
this state or benefits from the location in this state of authorized
installation, servicing, or repair facilities.
(B) This paragraph shall become operative upon the enactment of
any congressional act that authorizes states to compel the collection
of state sales and use taxes by out-of-state retailers.
(5) (A) Any retailer entering into an agreement or agreements
under which a person or persons in this state, for a commission or
other consideration, directly or indirectly refer potential
purchasers of tangible personal property to the retailer, whether by
an Internet-based link or an Internet Web site, or otherwise,
provided that the total cumulative sales price from all of the
retailer's sales, within the preceding 12 months, of tangible
personal property to purchasers in this state that are referred
pursuant to all of those agreements with a person or persons in this
state, is in excess of ten thousand dollars ($10,000).
(B) This paragraph shall not apply if the retailer can demonstrate
that the person in this state with whom the retailer has an
agreement did not engage in referrals in the state on behalf of the
retailer that would satisfy the requirements of the commerce clause
of the United States Constitution.
(C) An agreement under which a retailer purchases advertisements
from a person or persons in this state, to be delivered on
television, radio, in print, on the Internet, or by any other medium,
is not an agreement described in subparagraph (A), unless the
advertisement revenue paid to the person or persons in this state
consists of commissions or other consideration that is based upon
sales of tangible personal property.
(6) Notwithstanding Section 7262, a retailer specified
in paragraph (4) above, and not specified in paragraph (1), (2), or
(3) above, is a "retailer engaged in business in this state" for the
purposes of this part and Part 1.5 (commencing with Section 7200)
(d) (1) For purposes of this section, "engaged in business in this
state" does not include the taking of orders from customers in this
state through a computer telecommunications network located in this
state which is not directly or indirectly owned by the retailer when
the orders result from the electronic display of products on that
same network. The exclusion provided by this subdivision shall apply
only to a computer telecommunications network that consists
substantially of online communications services other than the
displaying and taking of orders for products.
(2) This subdivision shall become inoperative upon the operative
date of provisions of a congressional act that authorize states to
compel the collection of state sales and use taxes by out-of-state
(e) Except as provided in this subdivision, a retailer is not a
"retailer engaged in business in this state" under paragraph (2) of
subdivision (c) if that retailer's sole physical presence in this
state is to engage in convention and trade show activities as
described in Section 513(d)(3)(A) of the Internal Revenue Code, and
if the retailer, including any of his or her representatives, agents,
salespersons, canvassers, independent contractors, or solicitors,
does not engage in those convention and trade show activities for
more than 15 days, in whole or in part, in this state during any
12-month period and did not derive more than one hundred thousand
dollars ($100,000) of net income from those activities in this state
during the prior calendar year. Notwithstanding the preceding
sentence, a retailer engaging in convention and trade show
activities, as described in Section 513(d)(3)(A) of the Internal
Revenue Code, is a "retailer engaged in business in this state," and
is liable for collection of the applicable use tax, with respect to
any sale of tangible personal property occurring at the convention
and trade show activities and with respect to any sale of tangible
personal property made pursuant to an order taken at or during those
convention and trade show activities.
(f) Any limitations created by this section upon the definition of
"retailer engaged in business in this state" shall only apply for
purposes of tax liability under this code. Nothing in this section is
intended to affect or limit, in any way, civil liability or
jurisdiction under Section 410.10 of the Code of Civil Procedure.Karen Garcia
Are you a content creator? A serial entrepreneur? New to the space or a long time player? We'd love to work with you!
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January 19th, 2011, 04:00 PM #2
January 20th, 2011, 11:11 AM #3
LA Times Article California lawmaker pushes to tax online sales includes rebuttal from Rebecca Madigan:
"Beyond direct Internet transactions, Amazon boosts its California sales by relying on a network of local website operators who earn commissions as affiliates by directing some of their traffic to the Seattle company. That network, critics claim, creates a basis to require Amazon to collect sales tax from all its California customers.
Skinner's bill could put some of those small websites out of business, said Rebecca Madigan, a spokeswoman for 25,000 Amazon affiliates in California.
"Out-of-state retailers will simply stop advertising on the California websites to avoid having to collect California sales tax," she said. "So, at the end of the day, California website advertising income is cut off, and the state doesn't collect sales tax revenue."
January 20th, 2011, 11:51 AM #4
January 20th, 2011, 02:43 PM #5
January 20th, 2011, 11:47 PM #6
It wasn't deliberate to exclude PMA, just their omission. I swear, at least our perspective got mentioned, which doesn't always happen, particularly in the mainstream press.
Here's a good article, they interviewed me and totally get it (even thought this is an opinion piece and they didn't mention us, but that's okay by me, it's a great article). We're trying to make this about Skinner - definition of insanity is doing the same thing over and over and expecting different results (I recall that from a Whitman attack ad):
SACRAMENTO POLITICIANS WANT TO TAX YOUR INTERNET PURCHASES - FlashReport - Presented by Jon FleischmanRebecca Madigan
Executive Director | Performance Marketing Association
o: 805.445.9700 (PST)
January 21st, 2011, 02:25 PM #7Merchants, any data you provide to Google Shopping should also be in your affiliate network datafeed. More data means more sales!
January 21st, 2011, 02:36 PM #8"Skinner was joined by representatives from Barnes and Noble, California Retailers Association, California Federation of Teachers, International Council of Shopping Centers, and the Northern California Independent Booksellers Association amongst others when she announced the legislation, according to a press release posted on her Web site on Tuesday."
January 21st, 2011, 02:43 PM #9
January 21st, 2011, 02:43 PM #10
January 22nd, 2011, 02:55 PM #11
The bottom line is still "taxation without representation" which is against the constitution! Amazon (and every other online merchant) pays their individual state tax. Any other state trying to capitalize on out of state merchant's sales should be ashamed of their lack of understanding of constitutional law. Am I missing something?Peace,
Loving Everyone's Child Creates Magic
January 22nd, 2011, 03:25 PM #12
It's my understanding that it is technically the customers that owe the tax -- sales tax if purchased in-state, or use-tax if purchased out of state. But given the extremely low compliance rate on self-reported use-tax (many don't even know they're supposed to report it), Sacramento is trying to put the burden on the retailers to collect the tax for them (just as in-state stores collect sales tax).
So it really wouldn't be Amazon paying taxes -- just collecting money from CA customers and passing it back to the state. Of course they would face certain compliance costs.
The constitutionality argument isn't so much the taxation-without-representation as it is the interpretation of nexus. The Supreme Court has ruled in Quill Corp. v. North Dakota that out-of-state retailers were not required to collect sales tax. Skinner argues that Amazon isn't an out-of-state retailer, because of their thousands of associates here in CA.
If Sacramento just put a little effort into enforcing their existing use-tax reporting requirements, we wouldn't have to fight this every year. Of course they won't reach 100% compliance but that scenario will almost certainly generate more revenue for the state than this Amazon tax scheme.Your Ad Here.
January 24th, 2011, 03:42 PM #13
January 24th, 2011, 03:47 PM #14
January 24th, 2011, 07:01 PM #15
- Join Date
- January 18th, 2005
If I recall correctly, Amazon's position is that it will collect and remit sales tax for all states that request it, IF those states adopt a uniform system for determining, reporting, and remitting sales tax. Thus far, the "multi-state sales tax" efforts have gone nowhere, very slowly.
Congress could fix this problem IN JUST ONE DAY by enacting enabling legislation (either authorizing the multi-state sales tax effort, or perhaps by requiring businesses engaged in interstate commerce to collect sales tax for each state where products are shipped). All such efforts have stalled because enacting such a law would bring lots of anger against Congress, with zero federal revenue to offset it. (There is widespread fear that any serious effort to enact federal enabling legislation would turn into a national sales tax, with the federal government siphoning even more money away from state sales tax collectors.)
Amazon is unwilling to collect sales tax in states where it has no nexus, if other businesses are permitted to sell to consumers in those states without collecting sales tax; it argues that this is a fairness issue, and that if it is forced to collect sales tax while smaller online merchants are not, it will simply lose customers to those other businesses, and thus Amazon would lose revenue while the state collected no additional taxes.
Amazon would NOT be burdened by the cost of computing, collecting, or remitting sales tax for the 40-some states where it doesn't currently collect sales tax (in fact, Amazon currently computes and collects sales tax for many of its Marketplace merchants who have "nexus" in those states). The real burden would be the loss of sales in favor of smaller companies who aren't being targeted and scapegoated by state legislators and tax collection agencies.
Things are a little bit more complicated because it's likely that Amazon's business activities probably trigger "nexus" in some states (including California), without any "advertising-nexus laws," but I'm not aware of any state tax collectors seriously auditing or litigating this issue; such litigation might last a decade or more.
In the end, what's actually happening is that state legislators are "grandstanding" by picking on Amazon and other large out-of-state retailers (politicians use this issue to seek support from in-state merchants, while out-of-state retailers have no clout). Apart from New York, whose "secret retroactive" enactment of the first "advertising-nexus" law effectively "trapped" Amazon and some other merchants, the few states which actually enact these laws have collected NO new sales tax revenue, but instead have LOST income-tax revenue from in-state businesses and individuals whose advertising contracts with Amazon and other out-of-state merchants were summarily terminated (to lawfully avoid any impact of these laws).
What's scary is that even though I don't believe that California's Nancy Skinner and other legislators who re-introduce these bills each year actually believe they could collect any extra sales tax (Skinner drops her bill each year to prevent it from being heard in committee), it's entirely possible that in hurried back-room deals, absurd revenue promises might lead the "advertising nexus" language to be merged (again) into other legislation and enacted "accidentally," instantly wiping out hundreds of thousands of advertising contracts with California publishers.
I spent some time this weekend examining some affiliate agreements (at SAS, CJ and GAN), and I was reminded of the "advertising-nexus tax law" issue each time I noticed individual merchants' provisions excluding New York, Rhode Island, and North Carolina participants.
Last edited by markwelch; January 24th, 2011 at 07:24 PM.
January 24th, 2011, 08:23 PM #16
January 24th, 2011, 09:26 PM #17Your Ad Here.
February 5th, 2011, 01:17 PM #18Overstock Will Terminate CA Affiliates
And so goes the annual dance. Here is the text from Overstock's email I received last night:
February 4, 2011
Dear California Affiliate:
Overstock.com values your advertising efforts, and hopes to continue our business relationship for years to come. However, we are writing to inform you the California state legislature has once again introduced bills which put our continued relationship in jeopardy.
There are two bills that deserve your attention. The first is AB 153 and the second is AB 155. If either AB 153 or AB 155 passes in any form, Overstock.com will have to sever its relationships with all California Affiliates before either bill becomes law. Both bills are currently in committee, and may pass any day.
AB 153 targets the affiliate relationship directly. This bill is similar to "affiliate nexus" bills we have seen in a few other states, modeled on the law first passed in New York. If AB 153 becomes law in California, it will mean that if we use your affiliate advertising services we would be required to collect sales taxes on all our California customer sales.
AB 155 contains traditional affiliate nexus language, similar to AB 153, but also has a tattle-tale reporting requirement similar to a law passed in Colorado last year (which was recently enjoined due to constitutional concerns).
We believe both bills are harmful to business, unconstitutional, and contrary to decisions by the U.S. Supreme Court. Where similar bills have passed in other states we have summarily terminated our affiliate relationships in those states rather than submit to the unconstitutional burdens these laws impose.
However, you can prevent this from happening in California. In many other states, the voices of local affiliate advertisers were heard. They pointed out to their legislators and governors that such legislation was unconstitutional, would be bad for local business and would not increase state revenues. Those bills were either not passed or vetoed by informed governors.
You may want to make your voice heard on the matter. AB 153 was introduced by Assembly Member Nancy Skinner who may be contacted by telephone (916) 319-2014. AB 155 was introduced by Assembly Member Charles Calderon who may be contacted by telephone (916) 319-2058. However, it is more important that you contact your state representatives, and any others you personally know, and tell them they should not support these unwise bills. We encourage you to do this without delay.
Again, Overstock.com values your advertising efforts and is hopeful that, like other states recently examining and rejecting this legislation, including California in previous years, will once-again see that these bills are bad for business and bad for California.
Jonathan E. Johnson III
Overstock.com, Inc.Your Ad Here.
February 8th, 2011, 02:49 PM #19
March 8th, 2011, 12:33 AM #20
- Join Date
- January 18th, 2005
The Sacramento Bee reports that AB 153 was "stalled" after today's hearing -- but then says that it's likely to be approved by the committee within a few weeks.
Amazon sales tax bill stalls in Assembly committee
Hotly contested legislation aimed at compelling Amazon and other on-line retailers to collect California sales taxes stalled Monday -- probably temporarily -- in the the Assembly Revenue and Taxation Committee.
Committee chairman Henry Perea, a Fresno Democrat, placed the bill on the committee's "suspense file" after a lengthy hearing but the committee's majority Democrats appear from their comments to be ready to approve it. Perea said the vote may come within a few weeks.
* * *
Capitol Alert: Amazon sales tax bill stalls in Assembly committee
Remember, if the bill is enacted, Amazon (and dozens of other advertisers) will immediately terminate their advertising relationships with California web publishers (including me). It's quite likely that enactment of an "advertising-nexus" law would bring in only nominal new sales-tax collections, offset by a much larger loss of income tax revenue.
Last edited by markwelch; March 8th, 2011 at 12:52 AM.
March 8th, 2011, 09:39 AM #21
It's very scary to have so little influence over an issue so important to your livelihood. So many false and misleading statements were made by the proponents of the bill, I wanted to stand up and scream. The number of people in support of the bill at the hearing FAR outnumbered the number of opponents. But they don't know what they're talking about.
Still, the outcome (of the bill being assigned to "suspense") was expected. It means we have more time to try and influence the committee. We have to keep up the pressure.Your Ad Here.
March 8th, 2011, 10:54 AM #22
- Join Date
- January 18th, 2005
First, thank you for taking the time (and spending the money) attend the hearing yesterday. (And thanks to the other web publishers and industry folks who attended the hearing.)
I had noticed this weekend that the analyst's notes listed only a few opponents were listed for the bill; that's the trick they play by introducing the bill, then dropping it, then re-introducing it (and repeat) -- people like me get tired of the process and don't submit a new opposition letter. Then the professional lobbyists all get together and trade endorsements, so it looks like a huge list of supporters for the bill, and a short list of opponents.
The problem here is that we're fighting over a diversion -- political pandering and games, not any genuine effort to solve the problem of "sales tax unfairness." It's not Amazon's fault, but instead state legislatures and Congress have refused to act to end "sales tax unfairness." The Advertising-Nexus language doesn't solve the problem; instead, it merely punishes out-of-state retailers (a little bit) while also punishing in-state publishers (a lot).
I was surprised that the bill was actually heard. Perhaps they decided that because they'd worn out most of the opponents, they could orchestrate a hearing that would make the bill appear helpful. The ambiguity of the BOE analysis didn't help -- while one board member stated frankly in an op-ed piece that the law won't collect ANY sales tax, the actual staff analysis talks about how much the law would collect if the merchants don't all do exactly what we know they will do. (And then, even that absurd estimate is misquoted as $1 billion.)
After wasting lots of time fighting this bill, I now need to focus my energy on planning for how I'll adapt when Amazon terminates its advertising relationship with me. I'm already floating in red ink, so losing 26% of my advertising revenue overnight isn't something I can afford.
Last edited by markwelch; March 8th, 2011 at 10:56 AM.
March 9th, 2011, 12:28 PM #23
Thanks Affninja for being at the hearing. I think as you said before we went in, if you didn't do anything and the bill passed, how would you feel? That's a very bad feeling.
This is a game of politics, not logic. There was a hearing the week before, an informational hearing where the BOE and LAO presented their analysis, publicly stating they believe most merchants will terminate, the state will essentially see $0 in sales tax revenue, and likely a loss of income. They're bound by specific policies on what they can and can't publish in an analysis, but they were very public about their interpretation of situation.
It felt bad, it sounded bad, but it wasn't all that unexpected. we've always assumed this committee will pass this bill, they have to because of the political makeup. We made it very hard for them though. Very, very hard. The proponents are pulling out the kitchen sink of excuses, further proof we're getting to them.
it's a marathon, not a sprint. This bill, if ever passed, likely won't go into effect until Jan 2012, if not later.Rebecca Madigan
Executive Director | Performance Marketing Association
o: 805.445.9700 (PST)
March 9th, 2011, 12:55 PM #24
March 9th, 2011, 12:59 PM #25
That's a big question. This isn't in the budget (yet) and he's just acknowledged he'll miss his deadline so it could still go in. We don't want this in the budget or snuck in on the ballot in some way (it's hard enough for us to understand, imagine voters!). There's technical debate on whether or not this is a new tax. He's completely tied up with budget negotiations so we haven't been able to talk with him about this.Rebecca Madigan
Executive Director | Performance Marketing Association
o: 805.445.9700 (PST)
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