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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 ----
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.
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"?
"use taxes" -- read up on 'em.
I've fallen off your lawn, and I can't get up.
...that was made in another state? This is unpossible as this is out of their jurisdiction.
California already taxes items purchased out of state, even by non-residents.
I moved to California in January. When I went to register my car, they said I had to pay sales tax on the purchase. "But I bought this car 8 months before I moved to California." Doesn't matter, they still said the tax was owed, about $3K worth.
Clearly illegal, but nobody is going to spend $100K in attorney/court fees to fight $3K worth of taxation. Welcome to the People's Republic of California.
jrjBlog
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.
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."
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.
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.
--
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.
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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
Troll? How interesting. Apparently the bar is set pretty low these days.
Constitutional issues aside, this does nothing but decrease the revenue of California Amazon affiliate businesses, resulting in lower tax revenues.
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
How do you figure? Amazon benefits mightily from the literacy and general ability to function in society provided by schools. It benefits from people being able to travel around to jobs and obtain income. It benefits from the network infrastructure that provides the portal to customers. The list goes on. Amazon benefits from the fact that civilization exists. Ergo, it benefits from taxes it collects and forwards to the state.
They are a working example of why too much socialism in government is bad.
On the contrary, California is a working example of the disaster that is libertarianism. It demonstrates quite effectively the utter failure of government by referendum.
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.
Yeah, most companies can afford to give up 1/8th of their market. Leaves room in CA for a lot of start ups. The niche for online bookseller is no longer filled.
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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?
You are absolutely correct. See here.
"In prison you just have to shut your eyes and take it. Here you have to shut your eyes and give it."
Way way back (many years) California *was* sued over collecting sales tax on out-of-state registrations, and they had to refund a lot of money. If you already paid sales tax in another state, you should not have had to pay it again in California.
Exceptions would include coming from a state with no sales tax, and some situations that make it appear you are trying to evade the tax, which would include a very recently purchased vehicle.
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
States can't lose money from sales tax, since that money is still in their residents' pockets...before all of it and more was taken through property tax and fee increases. States are trying to squeeze money from their broke population, instead of looking at themselves, massively overstaffed, overpaid, and over-committed to boondoggles.
This would be instantly struck down as a restriction on interstate commerce (a state-wide tariff, more or less), as it should be. States taxing trade with other states is an amazingly fast way to a failed union.
Great Intellect...
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:
All this will do is make every online buyer in calif pay an extra ~%8 for their purchases.
8% really? What part of the state are you in? The area where I live has three different sales tax rates. 9, 9.25 and 9.5. 8% is just the sates cut. Then you have the county, the city and the transit district. When I got to see a breakdown of the tax rate I shit. I mean what the fuck the transit district gets .25%
The city and county I can understand, but the transit district.
I thought they were supposed to be self sustaining.
Obviously I was incorrect, they are subsidized by everyone who lives in the area regardless
if you use them or not.
You bet good ole moonbeam is gong to sign this.
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 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.
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...
People keep saying things like this and thinking they're clever... It's a pretty stupid argument. Tragedy of the commons, perception of fairness, and all that. There's a difference between being willing to pay more taxes if everyone else at a similar income level is going to do the same, and volunteering to do it by oneself.
I don't have any ideological opposition to a government/welfare system run entirely by voluntary contributions, it just doesn't seem remotely practical at present. This makes me a dirty statist sheep by Libertariandot standards, no doubt.
Also as a minor note, you can already give money directly to help pay down the debt (http://www.treasurydirect.gov/govt/reports/pd/gift/gift.htm), and I believe the IRS accepts intentional overpayments as well. The former program usually gets a couple million per year at best, thus demonstrating both our points to some extent.
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.
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.
Presumably, Amazon pays its federal taxes, which cover all the generic things that you've listed.
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.
No, they do not. They don't cover most local expenses. They do not fund schools or pave local and state roads. That's why we have sales and property taxes.
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.
That's right, they are local expenses. As such, they are paid by individuals and companies which reside in the state, because they are the ones who benefit from those local expanses. And Amazon does not reside in California (not that it matters, really, since sales tax is a tax on buyer, not on seller).
Amazon does collect sales tax from purchases in those states where it has a presence, such as Washington.
By the way, you don't need sales tax to pay for local expenses - you could have a state income tax instead, just like e.g. Oregon does it.
...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.