On The Money: Internet Police

Billion Dollar Plan Raises Privacy Concerns

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

More from On The Money
  • California Nightmare

    I just purchased a new shotgun from Big5 in Cali. I had to pay $25 for DOJ background check and have to wait 10 days. I then payed another $25 in taxes to Calfornia. What I should have done was purchased it out of state with no background check and no state taxes. I could have saved $50. Now I have to worry about paying taxes on a oil filter I bought on ebay so Julio’s family can get a welfare check, free medical, free education while he gets paid cash working his gardening business and pays 0 taxes. Julio lives better and has a nice SUV than I do These leftist liberals make me sick.

    • gary

      Not quite. Any guns bought online have to be shipped to an FFL dealer in California. You have to pay a transfer fee to the FFL dealer and still need to do the DOJ paperwork AND wait the 10 days. So the only savings when purchasing online is sales tax and any money saved on the selling price.

    • heatherfeather

      The waiting period on a shotgun in Idaho is how long it takes to remove the cash from your wallet!

      • Jack Kinch(1uncle)

        Idaho sounds like a good place to live.

    • Johnny

      If only Americans were are smart as Julio and demand the same rights that he has.

      Julio shows you how stupid you have been to abandon your Constitution and exchange it for a police state.

      Your taxes fund the terrorists, too. You are a sucker. Wake up.

    • Jack Kinch(1uncle)

      ‘Change’ your name to Carlos Chavez and get on the hayride. Just don’t vote demorat.

      • native

        The democrat and republican lawmakers in California are the same breed of rat

  • tonyg10

    They need more money. So they can spend it foolishly. They never have enough of our money. If you gave all the money the feds collect in a year to the state of California, next year they would demand more. What ever they collect is never enough.

    • edgog56@GMAIL.COM

      hows that democrat for governor working out for ya

      • Eric

        You mean the one I didn’t vote for? He is working out just the way the unions wanted him to…. ummm, I mean, he’s working out just peachy!

  • Fanny Forbes Franklen

    Stop buying anything form California. Move out of CA. it’s just that simple.

    I left after the King rots and will never go back to that degenerate hole of decay.


  • Rick

    Let’s give people of California another reason to leave the state. The democrats are taxing everything that moves but they won’t do anything to solve the real problem, lowering paychecks and benefits of all state workers. That’s the reason we are in this mess. All these overpaid state workers are draining the state budget. Why are we in denial about this.

  • Cole Thompson

    I’m all for this tax! In fact, increase it along with the sales and income tax!

    Since I left CA and now live in CO, I’m all for increasing their taxes!

    It is a wonderful experiment. Let’s see what happens.

  • Zander

    Man, CA SUCKS!!! This is just another reason why we need the FAIR TAX!!!

    • leone

      God, would it be so by just saying it!!

    • Johnny

      “Fair tax” is a Trojan Horse. Do not desire it. Demand instead a Wall Street tax. A 1% tax on all derivatives trades will bring in trillions every year. End the Fed.

  • Tee

    I just moved from CA after saying enough to paying 10.3% in income tax. The state is so poorly run and they keep demanding more. Good riddance!

  • Tom Davidson

    I sense a business oppportunity: set up a web site and mail drop in a state that has no internet sales tax. Make ‘straw man’ purchases for customers in states that have an internet sales tax. Then ship their purchases and collect their payments by other means.

  • WeThePeople

    Are these same tormentors going to impose a delivery fee to the Brick and Mortar stores in order to NOT have an advantage over Internet sales.

    This is just one more way for our Governments to torment us out of our dreams of getting ahead.

  • Troy

    i live in Illinois and these comments fit our state just as well, it is time to take the DemonRats out of control.

  • ImplementedHow?

    I work in IT and I can’t figure out how they would implement this. Did the BOE give any details on how to make this happen? Can Mr. Luery provide any more details? I can host a website on a server in another state? If I live in this state and have a website in another state would that get around the use fee/tax. At this point the article is more sensationalism than news. It does not help me make an informed decision.

  • BillV

    You have to remember these are government figures though. Spending 10 million
    to recover an estimated 1 billion really means spending 25 million to bring in 15 million. So California will have to raise taxes to fund this new program.

  • http://blog.fedtax.net/2011/05/04/cbs-sacramento-california-may-monitor-online-purchases/ CBS Sacramento: California may monitor online purchases « blog.FedTax.net

    […] 13 in Sacramento reports that California’s Board of Equalization is considering hiring “private vendors to track […]

  • Tony

    The same use tax requirements exist in Washington State and perhaps in other states that have a sales tax. In WA there is a special consumer use tax form online but hardly anyone knows about it. Generally only businesses remit use tax for online purchases of tangible personal property for which no sales tax was paid. But Washington state has in effect criminalized nearly all of it’s citizens who buy stuff online.

  • http://www.handalglobal.com/2011/05/internet-privacy-california-proposes-to-monitor-online-consumer-data-for-tax-purposes/ Internet Privacy: California proposes to monitor online consumer data for tax purposes | Handal & Morofsky, LLC

    […] propose to hire private vendors to monitor online transactions by California residents. As reported by CBS Sacramento: Under state law, if you buy something online from an out-of-state company with no physical […]

  • leone

    Fair tax NOW!

    • Johnny

      “Fair tax” is hardly fair. You will be robbed blind by it. You want a tax on derivatives trades. A 1% derivatives tax will pay off all our debt. It’s time we got our money back from the greedy bankers who stole it and put them in prison.

      • The Crimson Mane

        Sure, class warfare will save us all. Heaping taxes on the evil greedy rich will only cause them to raise the price on the goods and services their soulless corporartions provide you (unless of course you are only frequenting all of those stores run by poor people, my socially conscious friend). Either way you pay, and you’ll be just as broke and stupid as before. But hey, it sure sounds pretty.

  • Hedge66

    California is the incubator of stupid liberal ideas….they will never learn the solution to their budget problem is to stop spending. Keep it up Sacramento, keep driving people out of your state, drive out the ones who produce and pay taxes and you will soon be left with all the moochers.

  • Richard Carpenter

    Tax foreigners living abroad. -Monty Python

    • BillV

      I think Pelosi just introduced that bill on the house floor.

  • Mike

    No smart business person would ever set up shop in California. California is for illegal immigrants, not businesses. It’s an easy move to Nevada or Arizona if you want to succeed in business.

    California still doesn’t get it. The budget problems in CA come from SPENDING, not revenue. Stop giving illegals free school and social benefits and start deporting them. Then, the budget problems disappear…like magic!

  • dexter

    Left Ca 7 years ago for South Dakota, home of 3% sales tax, no state income tax,
    low vehicle license fees, few drugs, no gangs, lots of jobs, friendly people

    • http://klesb.wordpress.com klesb

      And free snow! And, lots of it!

      And, GREAT pheasant hunting!

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