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California Senate Approves Net Tax Bill
Grant Erickson points to this internet.com story, which says "On Thursday, the California state Senate approved a bill that requires businesses with stores in the state to charge their customers sales tax for purchases made over the Internet." The state's huge ($35 billion) budget deficit is named as a driving force for the measure.
This only affects people who live in CA and buy from California merchants. So this isn't going to affect the rest of us. Personally I don't see what the big deal is... California can't charge sales tax to "non-residents" because as yet the constitution still identifies interstate commerce as non-taxable.
Food not Bombs is a nice platitude but it breaks down when you notice that the Bombees are usually well fed
If you don't think a US$1,000 per capita budget deficit is reasonable, you too can Recall Gray Davis.
Actually, all states have that law... and most states have procedures to reclaim taxes paid in that state for items "used" out of state. Check your local law. In Theory, you are required to pay "USE TAX" on all items used in any location, MOST states empower merchants within that state to collect the USE TAX and refer to it as SALES TAX.
Food not Bombs is a nice platitude but it breaks down when you notice that the Bombees are usually well fed
If you already live in California (about 1/6 of the population of the USA does) then this bill doesn't affect you.
This is sort of like the massive tax on hotel rooms. Tax people from out of town, because they can't vote against the politicians levying the taxes!
Our state (CA) is slashing budgets for public schools, while spending $100 million on a new death row for San Quentin.
How LEFT wing is that?
"It's overkill, of course. But you can never have too much overkill." - Anonymous Slashdot Coward
Those of us in Minnesota always pay taxes on goods purchased over the internet or otherwise. It is called Use tax, and the idea is it protects our local business - while generating revenue for the state as an after thought... (I don't buy it either)
Nothing here to see - move along...
+++ UGUCAUCGUAUUUCU
Mail order remains a (thankfully) sacred sales-tax-free process, at least when the supplier lacks retail outlets in the consumer's state.
So why are Internet sales being treated differently? Seems to me it's the same damn transaction, only instead of a phone operator you use the Web. Why screw one of the few retail growth areas?
Oh. Right. Because they can.
I live in Colorado, and I have a small business. I'm an artist. If I sell a piece via the internet to someone here in CO, I have to colect sales tax; just as if the purchase had occurred face-to-face at an art show. Why? Because my business is located here. If that same purchase is made by someone in, say, NJ, no sales tax is charged. I don't have a business presence in NJ. Simple as that.
I have heard a lot of discussion about taxing all internet-based purchases, and I think (hope) that two things are going to prevent such a thing from taking place. First is the sheer scope of such a proposal. Collection and distributing the taxes would be a logistical, not to mention jurisdictional nightmare. Who gets what percent? Are states experiencing budget shortfalls entitled somehow to a bigger slice of the pie? Or does the whole thing get gobbled up at the Federal level? It's the sort of monkey wrench question that would make even the most dedicated tax lawyer blench.
Second, and more important, is the constitutionality of such a measure. If I don't reside or have a business presence in NJ, why in the hell am I paying a sales tax into their coffers? In a nutshell: no taxation without representation.
(Yes; I know about the sorry example of Washington, DC. Don't get me started on that one. So far as I'm concerned, it just proves my point.)
Doing my level best to piss off the religious right wing...
Your point would be valid if he was suggesting a brick-n-mortar shop closing stores and moving out, but I thought he meant just moving operations (web site & supporting infrastructure) out of state. And having all those rich numerous californians as customers, serving them through the very same web site, but just having employees and servers located someplace else. While there are no doubt measures in there to make it more difficult (esp. for 'mixed' companies that still have physical existence) to avoid taxing, it's quite likely many pure net retailers might consider moving to another state. And considering cost of living at CA is also very high, salaries high, leading to higher personnel costs, does that sound all that unlikely? For this to work out for companies, though, they better hope neighbouring states do not follow (as then distribution centers could be located near state borders).
Note that many 'traditional' companies shuffle their HQs and operations from one state to another, sometimes due to change in leadership (CEOs want "their" company to "their" state), or due to tax incentives poorer states offer... headquarters especially are moved pretty often (even big companies like Boeing that asked for bids from 3 cities a while ago, and chose best offer, Chicago). And since for net retailers things should be even easier to move -- they usually don't have assembly plants or factories to move, at most just distribution centers -- it should be even more tempting to try doing just that.
Basically, California as a market will still be tempting; but that's different from suitability as "home state".
I like paying taxes. With them I buy civilization -- Oliver Wendell Holmes
The thing is, mail order has been exempt from this forever. Ordering online is the same thing as ordering over the phone from a catalog. So there is a long standing precedent of not taxing people from outside of your state with your sales tax.
Now, being a Californian I have another point I'd like to make. When Davis came into office we had the biggest surplus in all of Californian history. At the end of his first term we now have the biggest deficit in our history. Were did all that money go?
It went two places: First, in typical political short sightedness our government started spending spending spending on various new government programs. How soon they forget the lean times.
Secondly, we deregulated our utility companies. However, they were deregulated without adequate competition. Deregulation was suppose to make prices go down. But since the same companies owned both the electricity generating companies (Like Sempra Energy) and the delivery companies (Like San Diego Gas & Electric) the greedy bastards took advantage of this new cash cow. The companies that use to make a profit when our electric bills were $75 to $100 a month tripled our electric rate (sometimes higher). My personal electric bill went from $78 one month to $224 the next.
So what does our governor do? Does he take over the generating plants like he threatened to do? No, he makes a deal with the electric companies to pay them off via the state's general fund.
So our huge surplus of ca$h went not to civil programs, not to a savings account that would generate interest for future lean times, not to tax rebates for those of us who paid them the money, it went back to the electric companies who were screwing us in the first place.
So thank you so very F*cking much Mr Davis! You've taxed us, you screwed us, you got in bed with the electric companies and screwed us again, and now you're going to tax us some more.
That's why many of us are trying to recall the Bastard.
You know, everybody seems to be asking how the nation can afford another tax cut. But nobody ever ask me if I can afford another tax increase.
Lets wake up. The working class is paying far more welfare to the wealthy than to the poor and this trend has been steadily rising.
w ww.fair.org: //www.taxpayer.net
"Microsoft enjoyed more than $12 billion in total tax breaks over the past five years. In fact, Microsoft actually paid NO TAX AT ALL in 1999, despite $12.3 billion in reported U.S. profits. Microsoft's tax rate for the past two years was only 1.8 percent on $21.9 billion in pretax U.S. profits." http://www.ctj.org/html/corp0402.htm
"Washington-based Center for the Study of Responsive Law has identified 153 federal programs that benefit wealthy corporations but cost taxpayers $167.2 billion annually [$175 billion in 2003]. For comparative purposes, federal support for food stamps, housing aid, and child nutrition costs $50 billion a year." - http://www.projectcensored.org/stories/c1995.htm
Fact: welfare for the wealthy is FAR GREATER than welfare for the poor. BOTH democrats and republicans strongly support welfare for the wealthy. The only debate is welfare for the poor which gets all the media attention despite the amounts being far less.
Result: the working class is paying for both the wealthy AND the poor, with the majority of benefits going to the wealthy. To me, "working class" are people who MUST work AND does work--so a doctor making $200k/year is working class to me.
Method: keep the media focused on welfare for the poor so the working class never even hears about the welfare for the wealthy. Do this by incenting the media by offering to help repeal existing laws that limit media monopolies or go easy on anti-trust remedies.
Why?: the wealthy take action in these matters by contributing money and contacting govt. officials while the working class whine about the poor--its easier for the middle class to look at failures of the poor instead of their own financial failure when comparing themselves to millionaires.
Opinion: Get better informed and take action! Share info, organize petitions, write letters and contribute to campaigns. Tax laws should be simplified to close the thousands of loopholes that only benefit wealthy millionaires. And I propose a fair & just tax cut that simply raises the STANDARD EXEMPTION from around $4,700 to match the poverty line of the prior year (i.e. $9,000 for single, $15,000 for family of 3).
Did I mention Microsoft paid no taxes on profits of $12.3 billion in 1999 and had a tax rate of less than 2% (two percent) for the past couple of years while the rest of us are paying more than TEN TIMES that rate? Yes I did, but its worth repeating.
Well? What are you waiting for? Do something about it!
Resources:
http://www.commoncause.org
http://
http://www.projectcensored.org
http
Last i checked, illegal immigrants don't get welfare, and as someone else pointed out, those underpaid illegal immigrants are part of the reason you pay so little for food at the supermarket.
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The rule is that if you have a physical presence in a state, you must charge sales tax to customers in that state.
Rat Shack - Multiple stores in every single state
Apple and Dell - Both have their own brick-and-mortar stores these days. Don't forget sales offices and service centers.
retrorocket.o not found, launch anyway?
Good thing I turned in my class paper before this came out, or else I'd have had to write 3 more pages.
A few quick thoughts on this and its relation to U.S. Constitutional law (citations, if any, at the end).
Sorry this is long.
The Constitution limits a state's ability to collect, or force a business to collect, sales and use taxes. In order to collect these taxes the Constitution's Due Process and Commerce Clauses must be satisfied.
The Due Process Clause is often referred to as the personal jurisdiction requirement and focuses on whether the taxpayer has purposefully availed themselves to the taxing sovereign. Modern due process rules have utilized a fairness test, which is refereed to in International Shoe as a "minimum contacts" test. The question, in short, is "Is it fair to drag the retailer into a CA court?" The business is usually considered to have availed themselves to the taxing sovereign if they have purposefully made sales into a particular state. The due process inquiry examines accessing the quality and quantity of the seller's contacts with the state.
Until the Quill decision in 1992, the Supreme Court had applied the Due Process and Commerce Clause requirement interchangeably. However, unlike the Due Process clause, which deals with the fairness of litigating against the taxpayer, the Commerce clause focuses on the effect the state taxation would have on interstate commerce. Therefore, the question is whether the imposition of the tax on interstate business would impede interstate commerce.
In Quill, the Court applied a four-prong test to satisfy the Commerce Clause requirement. The test dictated that the tax must "
[1] be applied to an activity with a substantial nexus with the taxing State,
[2] be fairly apportioned,
[3] not discriminate against interstate commerce, and
[4] be fairly related to the services provided by the State."
The Court stated that the 1st prong of the test established a "bright-line" requirement of "physical presence" to determine a "substantial nexus" and. the older "minimum contacts" view was rejected. Since Quill did not have a physical presence in the taxing state (North Dakota), it was not required to collect use taxes.
The Quill decision essentially exempted the mail order industry from state sales and use taxes, unless the business owner was physically located within the state. This rule has carried over to the Internet sales industry.
Two cases were the Internet retailer screwed up and got hit with CA's sales and use tax are Borders.com and Bn.com. Essentially, these two "click-through" retailers had no direct physical presence within CA. But, the two retailers had "brick-and-mortar" affiliates, Border's Bookstores, and Barnes & Nobles, Booksellers, respectively. The two legally and supposedly financially separated "click-through" and "bricks-and-mortar" companies were so closely affiliated that the CA taxing authority (and the administrative appeal Board) felt that the "click-through" company fulfilled the Quill "substantial nexus" test. These guys so intertwined their businesses that they shared marketing functions, and allowed customers to returns books purchased at "click-through" store to the "bricks-and-mortar" store.
So, the rule, if you don't want to be forced to collect state sales/use taxes, is don't put a physical presence in the state and don't so intertwine your "click-through" business with a local "bricks-and-mortar" business that the "bricks-and-mortar's" physical presence gets imputed to you via agency.
These two cases where done before CA passed this law. So, without reading the new CA, I'd guess it's a change in enforcement not a change in powers, which would be limited by the U.S. Constitution anyhow.
PS:
Every state that has a sales tax, must also have a use tax. Otherwise, the sales tax fails a Commerce clause test. However, normally, no one ever knows or cares about the use tax. And, especially after Quill, i
Sears and JC Penneys most likely have a brick and mortar store somewhere in your state. If they don't then they're not forced to collect sales tax. Simple as that really. Why should a small store in Washington have to know the various local and state tax rates around the country? For example, where I live the sales tax is 7%, while 5 miles to the south the sales tax is 5.5%. It'd be a huge effort to collect and get back to the states. Therefore they rely on you to record it as a use tax which we all do right? ;-)
Of course we now know the "prosperity" was based primarily on an unsustainable market bubble and massive corporate fraud. And I seem to recall various military adventures in Serbia, Somalia, and Haiti.
How to solve most of our problems: 1.Lots of nuclear plants. 2.Cure aging.
The Internet.com Story has a reference to the actual bill, but I doubt many folks followed it.
For me, the senate floor analysis was the most interesting. According to that, the effect of the bill would be $21 Million, assuming that they get 5% more companies to pay. This strikes me as optimistic, but what can I say.
Federal law already says you can only demand taxes from companies with a "nexus" in the state. This bill tries to "clarify" that a nexus includes service and support, as well as related companies that share a trademark name.
The legality of the law seems open to question, since some companies purposefully define their mail order and on line units as separate companies to avoid having a nexus in a state.
At most this bill will have a minor effect on a few companies. It is not a major change to sales taxes on internet companies.
I live in SoCal, been voting since 1974, and I'll second your rant. It explains why at this point, I'd be perfectly okay with gun turrets at the border. I don't have an issue with immigrants who arrive legally and leave the old country behind, but yet another problem with illegals is that they're far more likely to insist that everyone around them conform to their old-country ways.
:(
Frex: About 7-8 years ago, some medium-sized city up the coast (can't remember which one) cancelled their 4th of July parade due to "budget cuts". BUT -- they DIDN'T cancel the Cinco de Mayo parade. Goes to illustrate how the United States is rapidly becoming Los Estados de Mexico del Norte
Anywhere else, a baby is a citizen of the same country as its parents. AFAIK, the U.S. is the only country in the world that allows anyone born here to automatically become a citizen. A common trick used by illegals is to wait til a pregnant woman is in labour, then sneak over the border and walk into the nearest emergency room -- which won't turn her away, on humanitarian grounds. Once the baby is born, it is legally a citizen, and a horde of relatives not here legally in the first place (per stats I've seen, averaging about 40 people per such birth) are magically turned into legal residents.
In the 1800s when the U.S. was labour-poor, it made sense to encourage immigration, but not now. And why are we letting them force US to change OUR culture? Hey, folks, if the old country is so great, STAY there. If it's not, either leave it and its ways behind, or stay there and help FIX what ails it. Don't come here and then bitch about how terrible Americans are for being pissed at this invasion. If we did the same to your country, we'd be somewhere between pitched out on our ears, and summarily shot.
~REZ~ #43301. Who'd fake being me anyway?