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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.
Unfortunately this is something we've all known has been a long
time in coming. When it comes to the government and collecting
"their" money, they won't let any opportunity pass them by.
It will be interesting to see how this will impact online
retailing though. Not having to pay sales tax has been helpful
to sites like Amazon for keeping their costs lower than brick
and mortar stores. Although I think many people don't figure
the cost of sales tax into the purchase of an item as frequently
as they should (I know I don't), so it may not have that large
of an effect.
One interesting sales tax law in my home state (Utah) is that if
you buy something from a state that doesn't have sales tax
(Oregon) then you have to pay sales tax to Utah. Just one of
the lovely little "bend over and grab your ankles" type of laws
on the books. I'm hopeful they won't enact the same type of law
for internet commerce, but I don't have much hope.
Doug Tolton
"The destruction of a value which is, will not bring value to that which isn't." -John Galt
Integrating a system to charge, process and report state taxes, and losing business due to your higher prices,
OR:
Moving away from california.
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
I thought it was already the case that businesses who performed business over the Internet (or through catalogues or whatever) had to charge sales-tax as long as their business had a physical presence in the state?
E.g., I live in NJ, I buy from a company that has no physical business presence (i.e. a store-front or hq or warehouse) in NJ. I am not charged sales-tax. Legally, I am required to declare these items when I do my income taxes for the year and pay the sales-tax then. If I buy online from a store that exists in NJ (e.g., Best Buy), then they must charge sales-tax and that amount is included in my bill.
Maybe this is just NJ, or maybe I'm just confused. Any lawyers/accountants who can shed light on the matter?
This is not the greatest sig in the world, no. This is just a tribute.
As the article says, it only changes enforcement of the laws on the books, and maybe broadens existing rules just a bit: service and other facilities within the state now count as brick & mortar to cause you to be responsible for in-state sales tax.
Amazon already keeps its distribution facilities in Oregon and Nevada for just this reason. They might get caught if they have a supply/delivery depot set up for same-day delivery in LA.
This is mainly to put some muscle into collecting from folks like Wal-Mart, Barnes & Noble and Borders, who claimed to have separate businesses running their internet. The new law states that the same 'brand name' is a trigger for tax collection.
Design for Use, not Construction!
Doesn't California have a state income tax? Why isn't it enough that the state makes money on the income of the business that is able to make the sale? I've never understood this. How many different ways does the government have to tax the exact same transaction before it becomes too much?
Kent M Pitman
Philosopher, Technologist, Writer
I heard a story here in Oregon on the local news that the Oregon legislator is discussing a tax on fast food. I agree with this kind of tax that same way I agree with taxes on cigarettes and liquor. The state ends up paying for health care for obesity, lung cancer and liver problems.
However, I think that this internet tax does not have the same kind of reasoning. The internet is bringing revenue in for the state and now the state is trying to find a way to make more money.
Where the Music Matters
I think California figures that it is simply too difficult to move a web site. Once you get all of those internet requests aimed at a particular state, ecommerce aren't going to just dig up and move their address. Think of all the heavy machinery and man power it would take to point a domain from one state to another!!!
It is interesting to see California leading the way to in the sales tax fray...since the net has done a pretty good job of transferring wealth from other states in Ca. Only in the last year have other states begun making good inroads onto the web.
"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."
If this goes into effect, what will the effect be? Simple.
California's sales tax is typically over 8%. (It varies by location, because cities and counties are allowed to add on their own small deltas.)
So the result will be that companies which are primarily net retailers will CLOSE ANY STORES THEY HAVE in California. Standalones will move their operations to other states. Even large retail chains with an internet sales outlet may split into subsidiaries.
8ish percent of gross is a LOT in a heavily-competitive market. And the WHOLE POINT of buying something on the Internet is that the price differential must be more of a draw than the lack of a local facility is a repellant. So if a company has to charge an extra 8ish percent if it continues to have a presence in the state, it will, if at all possible, eliminate its presence in the state, rather than watching the bulk of its business switch to its competitors or just go away.
The net effect on California's budget will be negative. It will lose more in taxes, on store sales, employee income taxes, and other taxes on the businesses that fold up and move (or die) than it collects. It will also incur extra costs from the business shutdowns - such as unemployment and/or other social program costs for workers that don't move to follow the business.
==========
If this also passes the assembly it will almost certainly be signed into law - because Gray Davis is clueless about anything financial. (Witness his reaction to the "electric deregulation" debacle.)
Bantam Dominique roosters crow a four-note song. Once you've heard it as "Happy BIRTHday" you can't NOT hear it that way
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
*applause*
Let's see - we have a two-year boom in capital gains tax collections (oh yeah, you non-Californians probably don't know that we pay an extra 9.3% state tax on top of the 20% federal rate for long term capital gains), so we jack up spending by 40%+ over a term.
Then, when boom turns to bust, we're shocked - shocked, I tell you! - that revenues have fallen. But there's an election coming up, so we keep spending.
And taxing. Mandatory health insurance? Sure, why not fuck over the few remaining businesses in the state, they've got money! Jack up the taxes on employers for extension of maternity leave, too! Money grew on trees during the dot-com boom, the private sector obviously has an infinite supply of the stuff, so what's another 1-2% of that infinite supply when there's prole votes to be bought?
In answer to your question, "n+1", where "n" is the number of ways a given transaction is taxed in the preceding election cycle.
In Nevada, there's no state income tax, and there are places where you can walk down the street with a beer in one hand and a cigarette in the other.
In California, you pay the highest taxes in the nation - higher than most of Canada - and soon, you'll need proof of age-21 to purchase dangerous foods like cigarettes, beer, and now Oreo cookies.
Atlas, if you're listening, it's time to shrug.
Comment removed based on user account deletion
Currently , federal trade laws require any 'online' store that has a brick & morter store in a state that an order is taken from [err .. so if you live in CA, and we have a store in CA, and you order off our website in Towson MD] you are charged sales tax.
.. I spent five years of my life running a rather successful game/hobby store in NewEngland. I know how taxes suck, but I also remember how folks used to order crap online (back when the www first started taking off.) at wholesale + 5% with no tax from jerks who simply opened up an account with WOTC or Chessex [or god forbid .. Max at the armoury.] These folks would sell out of their house, and not have to pay sales tax, or operate as a business. [or for that matter, make money.] yet I was expected to compeate with all my overhead, YET pay taxes quarterly. (Which I did, rather well infact.)]
.. LEGITIMATE business taxes. One of the reasons we *HAVE* the law that you have to pay taxes in a state you have brick & morter in .. is *because* of a retail chain in california who would not 'sell' things at their cash register, but instead point the shopper to an internet terminal NEXT to the cash register and have them buy from there (and pick their product up at the end of the counter - thus avoiding sales tax, and keeping the business's bottom line better to boot.)
:) heh.
.. Im sure Wil Wheaton won't agree, damn bleeding heart that he is .. but I still admire the guy's guts. *grin*
No choice in the matter.
So basically, California's Gov isn't making a new law, he is enforcing a federal trade thang-a-mabob. He is ALSO protecting the REAL small business from closet industry. [which is good and bad i suppose.]
Makes sence to me actually, as bad as it sounds, why SHOULDN'T an internet store have to pay sales tax? if you have a physical location where you ship goods from, and ACT like a business (and expect to rake in the $$), you should be expected to have to behave like a business.
[And before all you 'free as in beer' folks start yelling
In the end of the day, business is business. Be it online, or offline - the laws are in place already.
Sure, it would really suck to be selling cold-cast reproductions of klingon's out of my mom's basement and have to *gasp* actually have a merchant ID and pay taxes on sales. [keeping in mind, you don't have to pay INCOME tax unless you make profit, or make over X a year in sales.] But these are not the folks he is going after. $10 in taxes a year from the 3 models this kid sells isn't going to make a big dent in 35 million/billion/whatever.
California is going after the folks who are using the internet as a loophole to avoid business taxes
Not like I begrudge the chain from TRYING:) thats what free market is all about. Use a loophole until it gets plugged
Blarg
--Ne auderis delere orbem rigidum meum, non erravi pernicose!
We don't have any damn sales tax. If you really want to avoid it move all your company here, all six of us could use a job...
Barnes and Noble (the B&M book stores) and BN.com (the web site) are indeed separate and distinct companies. I wonder how this ruling will affect them.
No boom today. Boom tomorrow. There's always a boom tomorrow. - Cmdr. Susan Ivanova
I have to disagree. Fast Food is NOT a cheap way to eat. I have a roommate that only eats fast food and it costs him approximately $15-20 a day to eat. I on the other hand make all my food. I eat granola, apples, bananas, lentil soup, stir-fry, etc... I spend $150 a month on this diet that is very healthy. The only downside is I have to spend time preparing my meals.
I think you're arguement just says that this kind of tax is a tax on stupidity and laziness which I have no problem with.....
Where the Music Matters
Let's dispute this "fast food is cheaper" myth.
.99)
1 Whopper medium size combo meal with tax: $4.06
Feeds 1. Final price: $4.06 per person
1 pound Barilla spaghetti: $1.29 (when on sale
1 jar Ragu spaghetti sauce: $2.50 (when on sale $2)
Grated cheese and electricity: $1 (overestimate)
Feeds 2-4 people. Final price without sale: $2.40 or $1.20 per person.
That's for name brand stuff, and when it's not on sale. If you make spaghetti on sale, it can cost less than $1 per person, and is more satisfying and healty than fast food.