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On The Money: Internet Police

Billion Dollar Plan Raises Privacy Concerns
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By Mike Luery


SACRAMENTO (CBS13) – With California deep in debt, a controversial plan has emerged that calls for private vendors to monitor what you buy on the Internet.

The Board of Equalization (BOE) says it could raise a billion dollars a year in previously uncollected use taxes, but critics call it haunting to hire “Internet Police”.

One of those critics is Monique Bell, who started My Kid Sister Clothing Company, three years ago in Stockton.

“If you wear it, we sell it,” Bell told CBS 13 inside her Stockton home.

Bell is the owner of My Kid Sister Clothing Company, an Internet portal that allows her customers to find clothes for kids – and the whole family at a discount. She’s concerned by the BOE plan – a staff proposal to identify Internet buyers who use her site and others, to purchase things from out-of-state vendors.

“I think it’s like Big Brother. It’s definitely very chilling,” said Bell. The Internet entrepreneur told CBS 13, “I think our customers are just going to stop buying from us. We’re going to see a dramatic drop in sales.”

Under state law, if you buy something online from an out-of-state company with no physical presence here – since you are not paying sales tax, you are supposed to pay a use tax to the State of California, but many people never do.

That could change however, under the BOE proposal, which would authorize California to spend up to $10 million to hire private vendors to track down what you purchase over the Internet.

“This is just a fishing expedition as far as I’m concerned,” said George Runner, an elected member of the Board of Equalization.

Runner is fighting the Board’s staff proposal. CBS 13 asked him to explain how it was pitched to the Board:

“One of the ideas is well, we think there might be some people who will sell us data,” Runner warned about the proposal. “That will tell us what kind of credit card transactions or private transactions that a Californian may have made in purchasing something out of state,” he told CBS 13.

Under the plan, California could generate up to $1.1 billion in uncollected taxes by monitoring what you buy online. Anyone purchasing more than $5,000 a year would be fair game. But active Internet users like Dan and Amber Campbell of Sacramento worry about government watching over their shoulders.

“I just really think it’s an invasion of privacy and it should be back in the hands of the retailer, not the consumer,” Amber Campbell told CBS 13. Her husband Dan Campbell has similar concerns.

“It would kind of be more of a Big Brother type scenario,” Campbell told CBS 13 “And I really don’t feel like we need one more person watching what we do online or what we purchase.”

Keeping tabs on Internet purchases is so controversial the Board of Equalization has pulled the proposal from the calendar for now – and asked for further study.

“This item was pulled from the calendar for further review,” said BOE Spokesperson Anita Gore via e-mail. “It was not ready for discussion at the time it was pulled from the agenda and is not ready for discussion at this time.  There is no one available from BOE for an on-camera interview at this time,” she told CBS 13 in the statement.

California’s Use Tax law has been on the books since 1935.

Last year, the state took in more than $3 billion – but there’s still more than a billion dollars that go uncollected.

Send us your story ideas via e-mail to onthemoney@kovr.com. You can also follow On The Money stories in progress via Twitter at http://twitter.com/#!/mikeluery

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