California to Tax Internet Sales

[EE_]

And so it begins...

California tells online retailers to start collecting sales taxes from customers
Beginning Friday, Amazon.com and other large out-of-state retailers will be required to collect sales taxes on purchases that their California customers make online.

By Marc Lifsher, Los Angeles Times

June 30, 2011
Reporting from Sacramento— Shopping at Amazon.com Inc. and other major Internet stores is poised to get more expensive.

Beginning Friday, a new state law will require large out-of-state retailers to collect sales taxes on purchases that their California customers make on the Internet — a prospect eased only slightly by a 1-percentage-point drop in the tax that also takes effect at the same time.

Getting the taxes, which consumers typically don't pay to the state if online merchants don't charge them, is "a common-sense idea," said Gov. Jerry Brown, who signed the legislation into law Wednesday.

The new tax collection requirement — part of budget-related legislation — is expected to raise an estimated $317 million a year in new state and local government revenue.

But those taxes may come with a price. Amazon and online retailer Overstock.com Inc. told thousands of California Internet marketing affiliates that they will stop paying commissions for referrals of so-called click-through customers.

That's because the new requirement applies only to online sellers based out of state that have some connection to California, such as workers, warehouses or offices here.

Both Amazon in Seattle and Overstock in Salt Lake City have told affiliates that they would have to move to another state if they wanted to continue earning commissions for referring customers.

"We oppose this bill because it is unconstitutional and counterproductive," Amazon wrote its California business partners Wednesday. Amazon has not indicated what further actions it might take to challenge the California law.

Many of about 25,000 affiliates in California, especially larger ones with dozens of employees, are likely to leave the state, said Rebecca Madigan, executive director of trade group Performance Marketing Assn. The affiliates combined paid $152 million in state income taxes last year, she pointed out.

"We have to consider it," said Loren Bendele, chief executive of Savings.com, a West Los Angeles website that links viewers to hundreds of money-saving deals. "It does not look good for our business."

The larger bite from buyers' pocketbooks will be eased only a bit because California's basic sales tax rate also will drop to 7.75% on Friday when a 2-year-old temporary increase expires. The basic rate in the city of Los Angeles falls back to 8.75%.

Brown's signature on the budget bills is aimed at closing a loophole that freed Amazon and other out-of-state retailers from collecting sales taxes for California.

Not collecting sales taxes gave Internet retailers a competitive price advantage over California's small businesses such as independent booksellers and big-box retailers with a presence in the state, including Barnes & Noble Inc., Wal-Mart Stores Inc., Best Buy Co. and Target Corp.

"You can't give one segment of retail a 10% discount every day. It's just not fair," said Bill Dombrowski, president of the California Retailers Assn., a major player in a coalition of large and small stores supporting the legislation.

California's new requirement will generate badly needed state revenue and send a signal to Congress that "we want to see a national solution" to the issue of taxing Internet sales, Dombrowski said.

California is the seventh and largest state in the country to pass a law to collect taxes on out-of-state Internet sales. Illinois, Arkansas and Connecticut acted earlier this year, North Carolina and Rhode Island in 2009 and New York in 2008. Amazon sued to overturn the New York law and lost in the lower courts. The company is paying sales taxes into an escrow account pending an appeal.

Other states currently are considering similar sales tax collection bills.

California's new law was drafted to circumvent a 1992 U.S. Supreme Court ruling that sellers can't be forced to collect sales taxes unless they have a physical presence in the state.

The new statute would establish that presence in two ways: when sellers pay commissions to other Internet sites in California, known as affiliates, that refer buyers; and when sellers have a related company operating in the state.

Amazon has thousands of such affiliates in California. It also has related business operations that include Lab126 Inc. in Cupertino, which develops Kindle electronic book readers, and a Studio City office for its Internet Movie Database unit.

One affiliate, Ken Rockwell of San Diego, the owner of a 12-year-old photography website, said he planned to move out of state.

"Will it be Las Vegas or Scottsdale or Ensenada?" he said. "It's a question of where, not if."

marc.lifsher@latimes.com

[Jazkal]

Stupid Cali, all they are doing is hurting themselves.

[chad]

all this will do is eliminate even more revenue. all of the affiliates will just move. now they won't even get tax revenue from declared income. retards.

[Twisted Titan]

. The new tax collection requirement —part of budget-related legislation —is expected to raise an estimated $317 million a year in new state and local government revenue.



Your masters from south of the border warmly welcome this fresh injection of new stimulus

[Twisted Titan]

all this will do is eliminate even more revenue. all of the affiliates will just move. now they won't even get tax revenue from declared income. retards.

The most liberal states will quickly follow suit.....I new york in a matter of months

[Sparky]

It doesn't make sense that internet sales are tax-exempt in the first place. Does it?

[Twisted Titan]

It doesn't make sense that internet sales are tax-exempt in the first place. Does it?

yes it does due to fact that everytime the product moved taxes were collected on it.

why pay the same tax another ttime?

[palani]

It doesn't make sense that internet sales are tax-exempt in the first place. Does it?

I exist therefore tax me?

I am a slave therefore beat me?

Is there any difference between these two statements?

[mightymanx]

The beast is hungry and needs to be fed.

Yet another of the 2347896543091003 reasons to get the hell out of California.

[ShortJohnSilver]

It doesn't make sense that internet sales are tax-exempt in the first place. Does it?

Um, read the Constitution.... items shipped from one state to another may not have taxes imposed on them. This was settled by the Supreme Court long ago, before the Internet existed, in the case of mail order companies shipping items from one state to another.

[mamboni]

Why should the state collect a tax on commerce it contributes nothing to? These companies are already paying numerous taxes like income, FICA and property taxes. Fuck the government. The government expects to be paid ad infinitum for doing worse than nothing: it is inhibitory, obstructive and counterproductive. But these greedy power-hungry bastards in government are so out of touch with realty that they continue to squeeze the golden goose, despite the fact that the goose is looking rather grey and sickly and is badly constipated.

Hundreds of companies will leave Californika, and the socialist welfare state will continue it's economic death spiral into universal misery, mediocrity and stagnation. These are always the end result of socialism-collectivism. Never before have so many been blessed with so much and screwed it up so thoroughly. Idiots!

[SLV^GLD]

It doesn't make sense that internet sales are tax-exempt in the first place. Does it?

It makes sense if you actually read the constitution (Article I Sections 9 and 10) or if you pay attention to judicial precedent (Supreme Court Quill v North Dakota).

[Horn]

This is huge, some midwest retailers will be put out of business over it I'll bet.

[Sparky]

All of your responses are from the point of view of preserving interstate commerce laws, or preventing over-taxation. But my point is that the internet component should be irrelevant. If inter-state commerce is not taxable according to the Constitution, then it shouldn't matter whether or not the transaction was internet-based. And if you are simply arguing that we are already over-taxed, that's fine, but again the internet part of it seems irrelevant to the argument.

The current system is at the expense of the brick-and-mortar stores. It's where you go to view the item before you purchase it tax-free on the internet. Is that fair? They have to bear the cost of the storefront, only to serve as the display case for internet sales. Won't the local stores eventually be priced out of business? There's a simple inequity going on that needs to be addressed. Rather than taxing the sales, maybe a fee should be paid by the internet-based retailer that goes into a pool that is paid out to all the brick-and-mortar retailers. Would that make it more palatable, since it wouldn't be going to the government?

[mamboni]

All of your responses are from the point of view of preserving interstate commerce laws, or preventing over-taxation. But my point is that the internet component should be irrelevant. If inter-state commerce is not taxable according to the Constitution, then it shouldn't matter whether or not the transaction was internet-based. And if you are simply arguing that we are already over-taxed, that's fine, but again the internet part of it seems irrelevant to the argument.

The current system is at the expense of the brick-and-mortar stores. It's where you go to view the item before you purchase it tax-free on the internet. Is that fair? They have to bear the cost of the storefront, only to serve as the display case for internet sales. Won't the local stores eventually be priced out of business? There's a simple inequity going on that needs to be addressed. Rather than taxing the sales, maybe a fee should be paid by the internet-based retailer that goes into a pool that is paid out to all the brick-and-mortar retailers. Would that make it more palatable, since it wouldn't be going to the government?

No and No. This is how moronic taxes and subsidies start and tie free commerce onto knots. Yes, brick and mortar stores are at a disadvantage, largely because they are obsolete. They should not be subsidized to help them survive - that is moronic. In time, the marketplace will put a premium on brick and mortar goods, if the consumers so demand it. The government should get the hell out of the business and stop deciding which businesses will live and die - this is primordial fascism.

[Spectrism]

It doesn't make sense that internet sales are tax-exempt in the first place. Does it?

Yes it does. A purchase in another state is no business of the state in which you reside. In CT, you are supposed to pay sales tax on anything you buy while out of state. As if people will keep detailed records of what they buy on vacation, just so they can tell CT how much extra they want to pay. It is criminal for states to restrict inter-state commerce.


Article IV - The States

Section 1 - Each State to Honor all others
Full Faith and Credit shall be given in each State to the public Acts, Records, and judicial Proceedings of every other State. And the Congress may by general Laws prescribe the Manner in which such Acts, Records and Proceedings shall be proved, and the Effect thereof.

Section 2 - State citizens, Extradition
The Citizens of each State shall be entitled to all Privileges and Immunities of Citizens in the several States.



Article I - The Legislative Branch

Section 9 - Limits on Congress
The Migration or Importation of such Persons as any of the States now existing shall think proper to admit, shall not be prohibited by the Congress prior to the Year one thousand eight hundred and eight, but a tax or duty may be imposed on such Importation, not exceeding ten dollars for each Person.
The privilege of the Writ of Habeas Corpus (http://www.usconstitution.net/glossary.html#HABCOR) shall not be suspended, unless when in Cases of Rebellion or Invasion the public Safety may require it.
No Bill of Attainder (http://www.usconstitution.net/glossary.html#ATTAINDER) or ex post facto (http://www.usconstitution.net/glossary.html#EXPOST) Law shall be passed.
(No capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration (http://www.usconstitution.net/glossary.html#ENUMERATE) herein before directed to be taken.) (Section in parentheses clarified by the 16th Amendment (http://www.usconstitution.net/const.html#Am16).)
No Tax or Duty shall be laid on Articles exported from any State.
No Preference shall be given by any Regulation of Commerce or Revenue to the Ports of one State over those of another: nor shall Vessels bound to, or from, one State, be obliged to enter, clear, or pay Duties in another.
No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time.
No Title of Nobility (http://www.usconstitution.net/glossary.html#NOBILITY) shall be granted by the United States: And no Person holding any Office of Profit or Trust under them, shall, without the Consent of the Congress, accept of any present, Emolument (http://www.usconstitution.net/glossary.html#EMOLUMENT), Office, or Title, of any kind whatever, from any King, Prince or foreign State.
Section 10 - Powers prohibited of States
No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque (http://www.usconstitution.net/glossary.html#MARQUE) and Reprisal (http://www.usconstitution.net/glossary.html#REPRISAL); coin Money; emit Bills of Credit (http://www.usconstitution.net/glossary.html#CREDIT); make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder (http://www.usconstitution.net/glossary.html#ATTAINDER), ex post facto (http://www.usconstitution.net/glossary.html#EXPOST) Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility (http://www.usconstitution.net/glossary.html#NOBILITY).
No State shall, without the Consent of the Congress, lay any Imposts (http://www.usconstitution.net/glossary.html#IMPOST) or Duties on Imports or Exports, except what may be absolutely necessary for executing it's (http://www.usconstitution.net/constmiss.html) inspection Laws: and the net Produce of all Duties and Imposts (http://www.usconstitution.net/glossary.html#IMPOST), laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Controul (http://www.usconstitution.net/constmiss.html) of the Congress.
No State shall, without the Consent of Congress, lay any duty of Tonnage, keep Troops, or Ships of War in time of Peace, enter into any Agreement or Compact with another State, or with a foreign Power, or engage in War, unless actually invaded, or in such imminent Danger as will not admit of delay.

[SLV^GLD]

my point is that the internet component should be irrelevant. If inter-state commerce is not taxable according to the Constitution, then it shouldn't matter whether or not the transaction was internet-based... The current system is at the expense of the brick-and-mortar stores. It's where you go to view the item before you purchase it tax-free on the internet. Is that fair?

A) If you use the internet to buy from say, wal-mart.com and there is a wal-mart anywhere in your state then you will have to pay sales tax on that transaction, even if the actual item ships out of a warehouse across the country from you.

B) Boo-fucking-hoo for the brick and mortar stores. If all they do is act as a display case then they deserve to be beat out by the competition that internet display provides. Brick and mortar works for services that cannot be digitized. Sometimes I want to hold the objects and compare them, sometimes I need to have a technician tell me how to use it properly, sometimes I want a place with a human who is less likely to tell me no on a return with a receipt because I am standing physically in front of them.

Sometimes, I want to sit in my underwear and have it arrive on my doorstep. Nothing stops a brick and mortar from delivering the same service. In fact, my local grocer and plenty of food services in my area do just that!

This question of interstate taxation in regards to internet sales has practically zero effect on brick and mortar stores. It's easy to try and blame certain issues on internet sales but they are easily described as a red herring. If anyone is getting stung by untaxed interstate sales increases by way of the internet it is the State itself. If brick and mortar is truly being threatened by internet sales then it is highly likely that the threat is from free market competition at work rather than lack of regulation.

[Spectrism]

All of your responses are from the point of view of preserving interstate commerce laws, or preventing over-taxation. But my point is that the internet component should be irrelevant. If inter-state commerce is not taxable according to the Constitution, then it shouldn't matter whether or not the transaction was internet-based. And if you are simply arguing that we are already over-taxed, that's fine, but again the internet part of it seems irrelevant to the argument.

The current system is at the expense of the brick-and-mortar stores. It's where you go to view the item before you purchase it tax-free on the internet. Is that fair? They have to bear the cost of the storefront, only to serve as the display case for internet sales. Won't the local stores eventually be priced out of business? There's a simple inequity going on that needs to be addressed. Rather than taxing the sales, maybe a fee should be paid by the internet-based retailer that goes into a pool that is paid out to all the brick-and-mortar retailers. Would that make it more palatable, since it wouldn't be going to the government?

Here is the difference.

Where did the purchase occur? Was it in CA or CT? Niether. It was in the middle.

[Dogman]

In most states , the city the business is in also gets a percentage from the state sales tax. So the state is not the only one benefiting. Local business lose, people may go to the store and look and feel, then use the net to buy.

It in general is cheaper to do so. So there is no way local business can compete. All they are are show rooms for hands on touchy freely for the shoppers that do not buy anything , walk out and buy the item on the net.

The local people only get business if the buyer wants the item, now and, does not want to wait.

[Sparky]

I guess there's a distinction between internet sellers who also have a widespread brick-mortar presence, and those who don't. For example, Walmart, Sears, Best Buy, etc. have both. So for any cost they incur by allowing the customers to touch and see the actual item, they also enjoy the increased internet sales resulting from convenience.

But we can all agree that the local independent business is then working from a competitive disadvantage. Maybe the right free market thing is to let him fail. But I will say that's not always in the consumer's best interest. I patronize my local hardware store, paying more than Home Depot, because they are friendly, helpful, informative, and conveniently nearby; I'd be very disappointed if they went away. I would rather drive 5 minutes round trip to buy a $14 wrench than drive 20 minutes to get the wrench for $13, or order it online and get it two days later for $12. Also, if TSHTF, I'd prefer that there be a local retailer with tangible items in stock who will trade for my mercury dimes in person.

[mamboni]

I guess there's a distinction between internet sellers who also have a widespread brick-mortar presence, and those who don't. For example, Walmart, Sears, Best Buy, etc. have both. So for any cost they incur by allowing the customers to touch and see the actual item, they also enjoy the increased internet sales resulting from convenience.

But we can all agree that the local independent business is then working from a competitive disadvantage. Maybe the right free market thing is to let him fail. But I will say that's not always in the consumer's best interest. I patronize my local hardware store, paying more than Home Depot, because they are friendly, helpful, informative, and conveniently nearby; I'd be very disappointed if they went away. I would rather drive 5 minutes round trip to buy a $14 wrench than drive 20 minutes to get the wrench for $13, or order it online and get it two days later for $12. Also, if TSHTF, I'd prefer that there be a local retailer with tangible items in stock who will trade for my mercury dimes in person.

Thank you for making my exact point.

[Half Sense]

So it just opens up new business models for the brick and mortar stores.

Why not have a local store where you can fondle hundreds of products, get advice and instruction from the staff, and place your Amazon order right there via the store's affiliate link? No sales pressure and the store generates revenue from Amazon. They could also feature in-store pickup if you don't want it shipped to your home.

[big country]

All of your responses are from the point of view of preserving interstate commerce laws, or preventing over-taxation. But my point is that the internet component should be irrelevant. If inter-state commerce is not taxable according to the Constitution, then it shouldn't matter whether or not the transaction was internet-based. And if you are simply arguing that we are already over-taxed, that's fine, but again the internet part of it seems irrelevant to the argument.

The current system is at the expense of the brick-and-mortar stores. It's where you go to view the item before you purchase it tax-free on the internet. Is that fair? They have to bear the cost of the storefront, only to serve as the display case for internet sales. Won't the local stores eventually be priced out of business? There's a simple inequity going on that needs to be addressed. Rather than taxing the sales, maybe a fee should be paid by the internet-based retailer that goes into a pool that is paid out to all the brick-and-mortar retailers. Would that make it more palatable, since it wouldn't be going to the government?

Is it the internet vendors fault that they are at an advantage?

Is it the brick-and-mortar stores fault that they are at a disadvantage?

No to both of those questions. It is the Governments fault that these two businesses aren't on the same level. I say we deal with the one causing the problem instead of blaming those who have no fault in the situation.

[Horn]

There are a ton of internet business that were set up in the middle of the country for the precise reason of a zero tax competitive advantage shipping to the coasts.

With 1/2 of their business on equal price footing with someone 10minutes away they will be toast.

[vacuum]

But we can all agree that the local independent business is then working from a competitive disadvantage.

Disagree here. Shipping costs even things out price wise. Time is another competitive advantage - do you want to wait 5 days to get something you need now? And what about returns? All in all, I think that where an item is bought most competitively depends on the item itself.

[Gaillo]

California to Tax _______

Just fill in the blank with pretty much ANYTHING and you'll have a true statement.

[SLV^GLD]

II patronize my local hardware store, paying more than Home Depot, because they are friendly, helpful, informative, and conveniently nearby; I'd be very disappointed if they went away. I would rather drive 5 minutes round trip to buy a $14 wrench than drive 20 minutes to get the wrench for $13, or order it online and get it two days later for $12. Also, if TSHTF, I'd prefer that there be a local retailer with tangible items in stock who will trade for my mercury dimes in person.

If you will go back and read my reply you may discover this is exactly what I was saying. Brick and mortar competes by offering an experience that no online presence can. My local lawn equipment provider, my local mechanic and even my local coin store all out-compete any online offerings for various reasons that cannot be overcome by the online vendors. If, however, they did get outdone by an online presence is still no reason to enact taxation as regulation because the taxes don't function in that capacity. All they do is increase STATE revenue.

[Horn]

In the end it kills business, because there is someone who won't afford the extra dollar.

[mightymanx]

California to Tax _______

Just fill in the blank with pretty much ANYTHING and you'll have a true statement.

Except for illegal border crossings.

[JohnQPublic]

In general those brick and mortar stores have either already gone out of business or become internet stores.

[JohnQPublic]

California to Tax _______

Just fill in the blank with pretty much ANYTHING and you'll have a true statement.


http://youtu.be/Maz9ddxEQnM

[JohnQPublic]

Except for illegal border crossings.


That may be part of the revised budget deal!