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California Assembly Approves Internet Tax
ClientNine writes "California could collect more than $1 billion a year by taxing Amazon and other online retailers if a bill approved by the Assembly becomes law. Assemblyman Charles Calderon, a Democrat from Whittier, says his legislation doesn't impose a new sales tax, but extends one that California should already have been enforcing. AB155 passed, 47-16, with the support of one GOP lawmaker Tuesday. It now heads to the Senate. Other Republicans rejected the bill because they said it would invite lawsuits, drive business out of California, and get the state entangled in the messy task of regulating the Internet."
Can anyone recommend a few states where these taxes are unlikely, preferably also a place where I have multiple choices of ISP?
but again this is coming out of CA ... business would be driven out of the state very soon as investors only care about money.
So this is effectively the Use Tax which everyone was already supposed to be paying.
The usual suspects up in arms complaining about this are likely doing so because they were previously dodging taxes by not properly including their purchases on their tax returns.
Sure they will.. They might lose that much however, as companies move out of state and leave people unemployed.
---- Booth was a patriot ----
CA residents are excluded. Go buy from someone else.
We don't want your business. Piss off.
Don't like it? Contact your politicans.
Once upon a time taxes got us a Revolution. Now they just get us pissy and twittery.
News Just In: 50 online internet companies have signalled that they are going to leave California at the earliest possible opportunity. "We continually strive to drive down costs to remain competitive against other online retailers and more conventional sales outlets", reported one CXO. "We have opted to move our headquarters to another state, and will if necessary, move to another country where we don't have these taxes". The move heralds the loss of 3000 IT workers at that company alone, and what is expected to be the loss of some 15000-18000 jobs in the state. State legislators failed to note that in an online world, presence on the internet can be physically anywhere there is an internet connection. State legislators didn't have any comments with regards to the news, but state and local IT people had plenty to say, none of which can be published.
The wording of all these "internet tax" articles are vague. Are virtual goods included in this mess?
Amazon and other internet-only vendors may yank their California offices, but nowhere in the U.S. are there more virtual goods manufacturers than in California, Bay Area specifically.
Charisma is the measure of someone's ability to lie with a straight face.
...that was made in another state? This is unpossible as this is out of their jurisdiction.
I've fallen off your lawn, and I can't get up.
The people of California voted for the representatives who approved this tax.
Palm trees and 8
We must tax innovative businesses that have low profit margins heavily, so that the taxes will be passed on to the consumer.
Otherwise we'd have to tax the highly profitable entrenched industries (like, um, say OIL COMPANIES) that could easily absorb tax increases without raising consumer prices.
And THAT would be so unamerican it would surely cause the earth to fall out of its orbit and go careening into the sun!
The internet is the one sphere of human interaction where libertarianism seems to actually work, and I think the only reason it took off was because it's been a lawless free for all. Since the barriers to entry are so low for much of the internet economy, competition is the closest to free and open that humans have ever achieved; nothing like the real world equivalent. We are slowly ruining it with bandwidth caps and shaping, laws to protect imaginary property, and taxation.
If you build it, nerds will come. Soylentnews.org
I seem to recall having seen online ordering a number of years ago where state taxes were being collected. You'd go to a site and see, "Michigan resident add 5% sales tax". They'd sometimes even be smart about it and check your ZIP code.
Then, some people didn't do that. Amazon didn't do it either; but a lot of small places didn't do it. States didn't do anything about it, either because they were behind the curve on the Internet, or they were too busy debating about gay abortions and hemp-scented trigger locks.
California has been known to set trends. It'll be interesting to see what happens.
For all intensive purposes, "whom" is no longer a word. That begs the question, "who cares"?
Some of us like the services that the government provides. While I'm generally more in favor of a progressive income, capital gains, or property tax, I'm okay with a sales tax if it means paying for schools, police, and buses.
Hopefully this will spark a trend around the nation. Internet retailers have been subsidized by the public for too long. It's time for them to operate on a level playing field with everyone else. They use the infrastructure and services states supply; they should help pay for it.
This is a requirement to enforce existing sales tax on merchandise shipped in from out of state.
Yes, it will primarily effect internet retailers (but will also affect mail and phone-order.) But it is not a tax on the internet itself, internet access, network traffic, or any other such thing.
I'll not get into a discussion in this comment as to if this is a good thing or not, but it pisses me off to see it referred to as an "internet tax."
only a rep would think to lower taxes instead of cut spending...and YES I do believe what he says when he says we already should have been enforcing this. This is typical stupid shit asshole moves by typical dumbass reps.
*cough* Reagen's administration would be increasing taxes. Reagen must be an asshole dem. This proper use of sales tax (which most states have) is usually ignored by the customers, so now they are just enforcing it.
Where are they getting this magical $1 billion figure? Yesterday's news stories where at $83 million. In reality it will be $0 because retailers like amazon will just cancel all affiliates in the state. This is the wrong type of tax at the wrong time. We need to invite more businesses into California not send them away.
The city I live in has offered several retailers (like Costco) an exemption from the cities portion of the sales tax in exchange for coming into the city and creating more jobs, this is the way to go. We get people from neighboring cities who shop here because it has more shopping stores and lower prices. Another city near us has a similar deal with a shopping mall.
A reduction in unemployment will help fill the state coffers better than an increase in taxes. I would rather have thousands of amazon affiliates earning money and bringing it into our local communities than this stupid law.
This is just another way for Charles Calderon to show his voters that he his helping the state and they should vote for him, while he is screwing the state of California. It's power & money hungry career politicians such as Charles Calderon (and his brother Ronald Calderon) that need to be thrown out of office. I support term limits because of greedy @#!#@# like him.
I just hope Jerry Brown is smart enough not to sign this.
The city I live in has offered several retailers (like Costco) an exemption from the cities portion of the sales tax in exchange for coming into the city and creating more jobs, this is the way to go. We get people from neighboring cities who shop here because it has more shopping stores and lower prices. Another city near us has a similar deal with a shopping mall.
Classic race to the bottom. This is how southeast Michigan ended up they way it did. What you're saying here is that Costco gets a free ride from the city and because of that, Costco draws business away from other stores, further degrading sales tax receipts. Soon every business will ask for similar exemptions in the name of "fairness" or some other such nonsense and before you know it, your streets are crumbling.
No, this is terrible public policy. We should not strangle ourselves in the name of job creation. We should instead create a good business climate by investing in public infrastructure. That takes taxes and has been shown over and over again to spur many more jobs than any tax cut ever has.
All this will do is make every online buyer in calif pay an extra ~%8 for their purchases.
This won't hurt the "internet companies" at all.
I do find it odd that a company that has 0% impact on the state social services, roads (the local delivery company pays taxes for them), or schools is now being forced to be a tax collector with no compensation.
I know California represents a large portion of their business But you know? It's not their WHOLE business and it may actually even out to some degree by closing down any operations in California. But if a business as well-known as Amazon were to simply pull out of California, it would send the kind of message that nothing else could. It has never been done before as far as I can tell and if it did anything, it would put world-wide attention on it and would probably result in a lot of business not just leaving California, but the whole US to run their operations somewhere just outside of US borders.
The California government is an example of too much taxation. The cost of everything is too much across the board. They are a working example of why too much socialism in government is bad. But too little is also bad. There must be balance and that's not something California seems to have. When their answer is "finding new things to tax" to resolve problems, then they are not looking at CAUSES but are more interested in surviving day to day.
The sales tax exemption for Internet purchases made sense while Internet sales struggled to establish themselves in the economy and the culture. Like most tax reductions or exemptions, it was a temporary exception. Because those sales taxes pay for the state's operations. The state has expenses for services that support the sellers, like the actual incorporation and all kinds of protections and infrastructure, and all kinds of protections for the buyers. When the transactions enabled by those services aren't taxed, the rest of the state's taxpayers must pay. And since California ran up even more debt under Schwarzenegger than it had when he was elected to reduce it, the expenses cost debt money, which is something like 150% of the original costs after interest is paid.
Sales taxes are the fairest and most reasonable tax. They scale with the benefit to the buyer and seller, and to the services that support each of them. They pay for us to live in a civilized society, instead of some corporate anarchy.
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make install -not war
To be fair, if I pay sales taxes on most stuff I buy at physical stores, I don't see why it makes sense for internet purchases to be exempt- especially as shopping shifts increasingly to the internet. I would go so far as to say it is irresponsible of the government not to start figuring out a (fair) way to tax online retailers the same as physical stores, instead of shoring up falling revenue by increasing taxes on the shrinking pie. That said, I think before online taxation starts it needs to be figured out on a national level so we make sure everything is consistent.
First you have to figure out how taxes are collected: do I pay taxes for my state of residence, the state I am in at the time I click 'purchase", the state the item is being shipped to, the state the item is being shipped from, or the state the company resides in (assuming it's in the US)? Once you figure out which state gets the money, it would help to have some sort of file or server that sites can check to figure out how much tax to charge- sites shouldn't have to expend resources to stay on top of tax rates in all 50 states.
In the meantime, the states really should hold off on trying to implement such a tax, as it seems most aren't very good at thinking things through.
My webcomic
Yeah, but you see...we Yanks left Europe over 200 years ago specifically because we didn't *want* to be like you :)
Okay, that was a cheap shot (sorry) but while there is a lot in Europe that's pretty cool, an almost 20% sales tax certainly isn't one of them.
MCSE? No, sir...I don't do Windows. Yes, I am an idealist. What's your point?
So instead of California getting something like 8% of the Amazon sales in sales taxes, you'd rather CA got the income tax on the Amazon workers in CA. That would probably be something like 8% of their income. But what Amazon pays its workers is much less than the revenue each gets Amazon; probably a lot less than half. Even if you count the money CA saves in unemployment and related benefits, it's clear that CA's state coffers will fill better with the sales taxes than with income taxes instead.
What you're counting on is the discredited (and aptly named) Laffer curve. Claims that reducing taxes increase state revenue are disproven anywhere you look. Moreover, the tax exemption and other subsidy deals offered corporations to locate in a given place never work to either increase revenue (or thereby decrease the burden on the taxed employees), or even to keep the corporation located there once subsidies drop. Because taxation how we pay for the services consumed by these corporations, and failing to tax them distorts the economy into a game in which the corporation's actual activity is merely a prop for tax evasion.
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make install -not war
I may be mistaken, but isn't interstate commerce controlled by the feds and NOT the states? Which is why there is no tax to begin with. So does that mean the state now feels they can step up and take care of the illegal immigration problem, too, since they now care to venture into the federal responsibilities?
Constitutional issues aside, this does nothing but decrease the revenue of California Amazon affiliate businesses, resulting in lower tax revenues.
As I recall, this happened in Colorado, where they tried to get Amazon to collect sales tax for their affiliates who had a presence in the state. Amazon responded by dropping all those affiliates. California is a bigger business, but Amazon may not cave. Soon, the business model for affiliates will be to sell into every state except the one in which they reside.
It amazes me how much work businesses will perform to avoid taxes. It is usually on the top three questions in the vetting of any business plan. More bad business decisions have resulted from factoring in the "tax consequences" than from all other things, except stupidity, of course.
You do realize that those groups you listed effectively control the California Legislature through the power of their public employee's unions. In other words, any tax on anyone is acceptable as long as it presents the chance that employment of union members does not decrease nor the benefits granted to said members.
The big correction coming down the pike is government employees losing the majority of their benefits and possibly facing a lot of forced time off without pay. Its a fair question about which state implodes first, California or Illinois, but both are beholden the government employee unions and they seem intent on granting more promises. Its almost like politicians think they can keep paying off for their election without having to worry about how it will be paid for.
* Winners compare their achievements to their goals, losers compare theirs to that of others.
What's California going to say when Amazon just up and moves off-shore and they not only lose sales tax revenue but also income tax revenue as all their employees are laid off?
Use insured value for shipping as a sales tax (with a minimum) for all inbound shipping excluding freight and possibly B2B shipping. The shipping companies have a hell of a lot to figure out already which they do ON THE COMPUTER so they can figure out the sales tax for inbound shipping based upon insured value. It will be an easy problem for their software to solve for them; just ignore their lazy bitching.
Since shipping businesses reside in the state they deliver to, they fall under state power -- while just taxing internet sales is impossible, my state was one of the 1st ones and nobody collects it and they can't make anybody out of state do it. They even have a silly item in the income tax form where you can put in all the sales tax you skipped... like anybody actually puts that in... or tracks their own expenses down to that level....
Its not fair that states are losing money they would have had before the internet and it is also not fair to the local economy that people avoid local business simply because the sales tax makes some online store about the same price. This HURTS your area and its not like they don't come up with other means to make up that lost revenue...
Some states are smart enough to not put sales tax on food and clothing (non luxury) and have for a long time-- that "complex" situation has been handled without computers. Although if you base the tax upon sales you need a consumer economy for it to pay out; if you base it on income you need lots of employed people... Both of which can create deficits...during a depression like we are in... more so than a lot of the spending.
Costco doesn't get a free ride, the people shopping there do. State tax is 8.25%, with city & county taxes it some areas it is as much as 9.75%. When people shop at Costco they pay 8.75% (they pay state + county). It isn't just Costco many other businesses who are bringing jobs are given similar deals. Our city is doing fine.
It isn't about tax cuts it is about reasonable taxes. Sales tax at almost 10% when we need more to flow through the economy is good?
I moved from PA to CA. My taxes in CA are quite comparable with what PA was bilking me for.
And the weather is better; the scenery is nicer, and my ability to create wealth is exponentially greater.
Hurr durr California taxes herpaderp.
Amazon is going to pull out just like they have pulled out of other states. So the net benefit is going to be ZERO, if the law doesn't pass the net benefit will be greater since affiliates will be charged income tax on their income. As for Amazon's direct operations in the state they can always be setup using subsidiary companies so these nexus laws can be bypassed.
Lower unemployment will always provide revenue than higher taxes (unless you are charging an insane amount in sales tax) because when some is employed they have money, which is spent on everything from basic needs to luxury products & services. This allows the money to follow through the economy and be taxed at multiple levels (including sales taxes). You also save a lot on Unemployment, Food stamps, Medical and related benefits usually provided to the unemployed.
As for reducing taxes increase state revenue is disproven, it has been proven in California in the last 15 years or so. We have had lower taxes compared to today, yet some of the biggest surpluses in California history. The only reason we are in trouble is because many of our politicians have bent over backwards to get union votes and in return have given them huge benefits packages.
"If you buy something in California from out of state, the vendor doesn't charge you California sales tax, and you proceed to directly use that item, you are supposed to pay use tax."
But what if you don't use the item straight away?
I buy stuff like batteries and removeable media online, so I have it when I need it., I don't necessarily 'use' it as soon as I get it.
IANAC (californian) but i do live in a state that theoretically has a 'use' tax - nobody pays it.
If states want to get more revenue, they should increase income tax (which after all is a fairer tax anyway)
I hope it gets enacted and all loopholes for avoiding the 9.75% sales tax are closed. Only then will Californians realize that the 9.75% sales tax is too much. For as long as online shopping is tax-free, Californians will only mildly complain about high sales tax, but do nothing about it. Eliminate that, and they will get up in arms over it.
>>While I'm generally more in favor of a progressive income, capital gains, or property tax, I'm okay with a sales tax if it means paying for schools, police, and buses.
I like schools, buses and police, too. The issue is appropriate levels of pay. We pay far far higher wages for public employees in California than cost of living adjustments can account for.
Out of curiosity, how much do you think a prison guard should make here in California, on average?
Do you really think California is having trouble balancing its budget because of "schools, police, and buses"?
DATABASE WOW WOW
And do business in a more business friendly state. Texas with its low income taxes and growing hiteck industry sounds pretty good. Politicans need to think more about the consequences of their actions.
http://saveie6.com/
Amazon is still charging sales tax in NY.
"I just hope Jerry Brown is smart enough not to sign this." Do you really expect Jerry "Moon Beam" Brown not to sign this? The guy is desperate to raise revenue anyway he can. He knows that any tax increase he presents to the voters will go down in flames. I still can not believe that he got elected 30 + years after he was Governor twice. As far as term limits are concerned, they have been around for over 20 years. They kind of work. The scumbags serve two terms in the assembly and then two terms in the senate. Then they go back to the local (city/county) government and get elected there. They then continue to run for office until they have their fully vested pension to collect. I have seen a number of these guys along the central coast do this. It makes me sick. My tax dollars hard at work supporting these scum bags that I would not have voted for if they were the ONLY one running. PoliTICKS= sucking the blood out of the voters anyway they can.
It's unconstitutional to invoke inter state taxes.
RTFM!: The U.S. Constitution.
https://www.youtube.com/c/BrendaEM
It's located on your State Income Tax return under "use taxes"
There ought to be a box labeled "Other amount that you think is fair" ______
This just adds directly to the taxes owed.
Logically, if all the voters who normally vote for taxes, just volunteered, then they would raise a bunch of money, right? Unless the people who vote for more taxes tend not to be the ones who expect to pay for them...
This issue is a bit more complicated than you think.
Sigh... I've said it many times and I will say it again...
Where ever you place a tax, it always comes out in the wash (the price of a product). So if there is going to be a tax the best thing the government can do it put it where it has the least burden to collect and enforce. With regards to the Internet that would be the shipping companies. Shipping companies already have all the infrastructure required for vary pricing according to zip-codes.
But no, out legislators have no brains. They just decree tax collection like a kings herald and expect everyone to comply on demand, and then stand by idly by as it drags down the economy without a single notion of what it is they've actually done.
:T:R:A:N:S:
The measure extends the sales tax to online companies that have a presence in the state, including those that work with sister companies with offices in California.
Nothing wrong with that. That's the definition of sales tax.
The stuffed suits in Sacramento are certainly good at one thing and that's regulating something until it becomes extinct. Even before this latest bill, California was considered among the worst states to do business in. This should seal the deal and cause even more businesses to leave California.
Use taxes have existed for decades. If you're not paying them, you're dodging taxes. Every single state that has sales taxes has use taxes. California is just ENFORCING its EXISTING use tax, and this new law will only take a little bit of extra code in a web developer's shopping cart code to make it happen (which wasn't the case back when use taxes were first passed). If you don't like this, get a time machine and go back to before you were born to get the use taxes un-passed, or have your state representatives repeal use taxes. STOP WHINING, this isn't a new tax.
The idea of multiple taxing districts is INSANE. Instead, the feds should get an agreement out of ALL states that one rate is applied to all internet sales. And in that agreement, it should also say how much the feds will take, AS A PERCENTAGE, with the rest going to the state. Then each state can decide how to split the tax.
I prefer the "u" in honour as it seems to be missing these days.
With the economy of California in the toilet, the Democrats just keep flushing those jobs down the drain... Amazon will simply leave the state - Texas is very business friendly, let California go belly up like the dead fish it is...
Californians will start moving here to Texas. Quite frankly, we don't need them, or want them. What we need is some type of border wall to keep these Cali-foreigners out of Texas proper. The Anglos can take care of the north, and we Latinos can secure the south.
California is the perfect example of a fool. A fool doesn't look to change his ways, but ways keep from changing. A fool never believes it's him but them. A fool believes more of what makes him a fool is somehow better. On and on it goes. The bottom line is California will piss away any new money they rob from the producers and will until such time that the producers simply say no more. It's government gone well past it's usefulness and should die on the vine. Simply looking for new money in any form is energy they should spend on fixing their laughable condition. And I do laugh at California. It's a state that should be allowed to starve to death. I hope it does.
What if out of state companies say, "No.", and don't collect the tax? They are out of state. California has no legal jurisdiction over them.
My Amazon Affiliate account was terminated the day it took effect. If you're an Amazon affiliate, think of moving your business address to a more friendly state. In my case, I wasn't making enough for it to make sense to incorporate elsewhere. "The power to tax is the power to destroy".
"Do the Right Thing. It will gratify some people and astound the rest." - Mark Twain
Could someone please require legislators to take a freshman level economics class?
This WILL drive business out of California. Amazon will pick the fuck up and move out of the state. The companies that don't move will be driven out of business because they can't compete with the ones who do. The SCOTUS has held that individual states don't have the right to tax entities that don't have a physical presence in that state.
This is about some know-nothing asscock wanting to stick it to "the corporations". It completely misses the fact that it will hurt people in their state.
LK
"Hi. This is my friend, Jack Shit, and you don't know him." - Lord Kano
A number of years ago California decided they were missing out on all sorts of taxes from the movie industry, so they figured what the hell and raised the corporate tax on making a film. Instead of getting extra tax money, they lost billions because the film industry just left to film other places. Now, not only are they collecting far less because so many fewer films are made here, but we also have a crazy high unemployment in LA because of all the people whose jobs left. Not only do they collect less from the film industry, they now collect less because of higher unemployment, and pay out more. Some times, higher taxes are not the answer. The big problem in California is with propositions getting on the ballot spending money from the general fund that just isn't there. We have so many crazy taxes on the books now my state taxes went up $600 in one year.
Sure is regulating (or atleast taxing) interstate commerce in here. That could also be interpreted as California putting a tariff on goods imported from the states, which might also be explicitly forbidden by the constitution.
Amazon doesn't have any workers in CA, their affiliates do. The point is that, in this case, Amazon will just drop any affiliate programs they have in CA - they will still lose much less rather than if they caved in and started to collect sales tax (we have already seen this happen in Colorado in exact same situation, so it's not pure conjecture). So CA will still not get any sales tax from Amazon, but now it will also get less income tax from ex-affiliates (as their businesses would clearly be hurt).
The reason why your arguments do not apply is because Amazon is already not located in CA in practice. What CA is doing is legal trickery to redefine "substantial presence" such that it would apply to Amazon; but it is simple for Amazon to dodge that, and it would be cheaper for them to do it, so of course they're going to. They don't really get any benefits from those taxes CA collects, so for them it would not be a part of the equation.
don't tax me; tax that man behind that ISP.
This is such a great idea; states bidding against each other with out-and-out bribes for companies to move. Why do you think the only new US factories are opening in the South? They sell their impoverished desperate citizens willing to work for pennies on the dollar as a 'business opportunity'.
What is it with these people ? Do they spend all day looking for things to tax ? This would be a nightmare to regulate anyways and yes, drive business away. I long for the old Internet before the vendors and spammers got hip to its ways. Now all we have are ISP and Anti Viral companies to bent on profit to actually stop Trojans, Viruses and spam dead in their tracks. The world is a sad stupid place.
End of Line.
As some have already mentioned, collecting sales taxes cross-state is a significant burden since, in some states, the rates may differ even from one side of a street to another. Using ZIP codes does not provide enough granularity to determine the proper rate. With this in mind, several states started the "streamlined sales tax project" which aims to provide the data for determining the proper rate, a single point of reporting and indemnifying businesses from errors in the rates supplied. If every state which imposed a sales tax adopted this system, it would practically eliminate the burden facing Internet (and traditional mail-order) businesses today.
That said, enforcing the use of this system would require Federal legislation and, even then, there will still be the issue of purchases from other countries. I'm not so sure that it's a good idea to get the Federal government involved anyway since they might be too tempted to add a Federal sales tax as well.
Unless i had missed it. I am suprised this was not brought up on the John and Ken Show on KFI. One more reason to have some heads on sticks. Does not suprise me. A lot of cities in Canada take tax on cable, phone and ISP services.
...of an economic basket case already, they can't think of a thing to do but kill some more of their tax base. Good thinking, there.