Lawmakers Pass Online Tax Bill

SACRAMENTO, Calif. (AP) — California lawmakers have passed a bill to force out-of-state Internet retailers such as to collect taxes under two different legal theories, both of which have been criticized by online sellers.

The online tax bill combines elements of other bills introduced this legislative session. Supporters expect it to bring in $200 million or more per year, $83 million from Amazon alone.

The bill, ABX1-28, was approved last week as part of a Democratic package to meet California’s budget deadline. Gov. Jerry Brown promptly vetoed the main budget bills, but others, including the online tax bill, were passed but not sent to the governor.

The intent is to capture some of the estimated $1.1 billion California is owed each year in “use tax” but never collects.

The use tax is charged on purchases from out-of-state sellers for goods to be used in California. It is levied at the same 8.25 percent rate as the base state and local sales tax. California retailers must collect sales tax, but customers are expected to report and pay use tax directly to the state. Many don’t.

Much of the uncollected use taxes are for Internet sales by retailers with no physical store in California that could be used as a “nexus” for tax-collection purposes. Amazon, with billions in annual revenue, only collects taxes on sales to five states. California is not among them.

The tax legislation adds several new ways to define a nexus for tax collection.

One approach requires online sellers to collect tax if they have affiliates in California that refer shoppers to their site. Similar efforts in other states generated opposition because online retailers responded by severing relationships with in-state affiliates, often small businesses. Amazon has said it would do the same in California.

In a more novel approach, the bill requires an online retailer to collect the tax if it has sister companies in California, such as a marketing arm or product developer. Even backers of that approach expect it will be challenged in court if approved.

(Copyright 2011 by The Associated Press. All Rights Reserved.)

  • Dew

    You lefty politicians representing California are nuts and not worth any more of my valuable literary time!!!!!!!!!.

  • mert

    Whoop there goes another buisness outta Cali,,,,,,

    • Mark

      Next time read te article.

  • Michael

    Let’s just tax, yeah that’ll solve everything… We’re broke face it… How about you give up your pay forever, give up your fancy state cars that you like to get DUI’S in, give up your fancy homes, and downsize life… By the way, try finding a job in California so you can work and legislate the State… The rest of us manage our lifes on minimal money… You do the same and our state will have much more to spend… It’ll be easier for you to cut if you lived our life style!

  • Me

    Sorry righty, but the problem we have is a revenue problem.

    Now please go cry your bitter right wing tears.

    • Michael

      Even if it was a revenue problem, more taxes are only going to push jobs out. When did you last look for work in Cali?

    • Landsnekt

      Hey Me…

      The problem is not revenue. California is expected to take in over $93B this coming year (and that number keeps going up). The problem is one of policy. We have policies that fail to take advantage of Californians size for procurements. We have policies that prevent business from creating more revenue or worse force them to move out of the state. We create jobs (in the state and local government) that are not needed. We have people collecting a check and they do nothing all day for that check. We have medical care that is being paid that no one is getting. We have people who think they are entitled to some thing for nothing.

      This is all due to California’s policies. Fix the policies and the revenue will be there. If we let the politicians take the easy road, it will never get fixed. We need to force them to make the hard decisions before the easy decisions.

      Also, did you know that California is one of the most taxes states in the union (right behind new york and Massachusetts). with all the money California has, we should be spending it smartly not in the stupid methods they have been using.

    • Fred

      Sure sounds like you’re on the dole – classic taker. ES&D!

  • concerned citizen

    How is it such ignoramuses continue to get elected … from both parties.
    Instead of trying to collect out of state taxes, cut expenses and lower the tax rates here!
    An almost 10% tax is userous, and onerous.
    Cut, cut, cut is the only answer. California is broke and only less regulatory Government with lower taxes will get us out of the mess the legislative and executive arms have put us in.
    Working people don’t mind paying a share but enslavement to pay bills Government creates at whim without fiscal or monetary sense cannot continue.
    At least Gov. Brown had the courage to veto the latest joke of a budget. Here’s hoping he drives real cost reductions into a reality. 20 -30% cut across the board, with lower taxes for private individuals and businesses.
    Then one won’t see so much business going out instead of coming in.

  • Doc Summers

    What would you say your tax rate is? 15%? 25%? 30?

    I would suggest to you that is more like 150%-1500%. Think thats a silly statement?

    All taxes collected from you have been spent. Just think of the dozens and dozens of taxes you pay.

    All your social security you had paid for and set aside for you has been spent, and You owe it back, even though it was stolen from you.

    See where we are at so far?

    Now, double print the money supply as it has no backing anyway. Now all your savings has just been taxed at an additional 50%.

    The intent is to collapse the system, while everybody owes, in order to implimeent a new paperless, chipped, one world order, banking system of power over all humans. Diminished rights as well

  • Russ

    Not only take away savings by us taxpayers you now penalize us with a new tax. Do your damn jobs and quit punishing tax payers.

  • John

    It is not about a leveling playing field, another lie by a politician to pass more taxes, plus don’t we need to vote on this new tax?

    Also it is Illegal to tax a business that is out of state, Amazon would have to recode their entire online shopping in order to find out if the product someone is ordering is coming from ca or not. and then apply the sales tax.

  • @Me

    Over 50% of people pay no Federal income tax. I’m willing to bet it’s around this same percentage that don’t pay any State tax. It’s time to start taxing the deadbeats like you!

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