‘Amazon tax’ heads to California

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government.jpgADOTAS — Are California lawmakers after out-of-state advertisers?

A California bill, AB 178, will, according to Assemblywoman Nancy Skinner, D-Berkely, close a loophole in California tax law which has allowed out-of-state companies to avoid collecting California sales and use tax. She says that “During this unprecedented fiscal crisis we cannot afford to lose sales tax revenue from out-of-state companies when our own local businesses are struggling to keep their doors open.” AB 178 is modeled closely after a New York law and, according to Skinner, is expected to raise approximately $55 million in revenue per year.

But performance marketers, including the Performance Marketing Alliance, are saying that it unfairly categorizes publishers as sales presence for out-of-state advertisers. This means taxes will be levied on out-of-state advertisers, potentially causing them to shut down their publisher relationships in the state, which apparently happened in New York.

I would be hard press to believe Gov. Arnold Schwarzenegger would back this bill, and I’m assuming that it is considered raising taxes, which would then need a 2/3 vote. A majority is needed. Here is the proposed wording:

5) Any retailer entering into an agreement with a resident of
this state under which the resident, for a commission or other
consideration, directly or indirectly refers potential customers of
tangible personal property, whether by a link or an Internet Web site
or otherwise, to the retailer, if the cumulative gross receipts or
sales price from sales by the retailer to customers in this state who
are referred pursuant to these agreements is in excess of ten
thousand dollars ($10,000) during the preceding four calendar
quarterly periods. This paragraph shall not apply if the retailer can
demonstrate that the resident with whom the retailer has an
agreement did not engage in referrals in the state on behalf of the
retailer that would satisfy the requirements of the commerce clause
of the United States Constitution during the four quarterly periods
in question.

— Express your opinion, comment below.

6 COMMENTS

  1. These are the extremes California must go to in order to cover up their own spending mess. This is what happens when government spends out of control – as Obama is about to commit. This is what happens when you have Democrats in control – overtaxation, overspending.

    California now wants to dig into the pockets of other states and those tax payers for their own infirmities.

    NY is clearly not doing any better. Gov Spitzer and now Gov. Paterson’s misbegotten policies, due to wasteful spending, now threatens New Yorkers (Manhattanites) with exorbitant public transportation prices, fare hikes, and curtailed service. This is an outrage and example of wasteful, useless, big government.

    Where does all that money go? New Yorkers don’t know and Californians don’t know.

  2. I urge California publishers to call your representatives and let them know not to support this Bill because it is NOT good for business in California.

    But, unlike the poster before me, I will not blame Democrats for this, because we can see what a great job Republicans have done with the economy in this country. Corporate Welfare is worse than high taxes.

  3. Brilliant! Just what CA needs – antoher business killing bill and more taxation to deter out business accross state lines.

    The tax and spend Democrat controlled state senate in Sacramento is giving their inept federal counterparts in DC a serious run for their money.

    Wait – that’s our money their playing with. Son of a…

  4. Another example of our Sacramento wizards’ inability to look beyond the next press release. Impose a sales tax that will drive a large portion of online marketers out of the CA market. How much sales tax did you collect?
    At the same time ruin small and medium websites based in CA who no longer have an important source of revenue. Reduced income equals reduced state income tax, Just brilliant.

  5. This is not a new tax. It is the collection of an existing tax.

    There is no collection of tax from non-Californians. The law requires Californians to pay a use tax that is already law. Out-of-state retailers are required to collect the tax from Californians and forward that money to the state.

    While AB178 is a bad law for California small business, try to get your arguments right about what’s wrong with it.

  6. Californian,
    As I noted, it closes a loophole in California tax law. You can say it’s not a new tax but that’s semantics. They didn’t have a tax before, now they will have to deal with one. The way I read it is that out-of-state businesses will have to collect and then remit sales tax.

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