Monday, March 07, 2011

AB 153 Out of State Internet Tax

AB 153 is coming up before the Assembly Rev and Tax Committee today. This would have out of state internet sellers required to collect the sales tax as brick and mortar stores do now.

This is not a new tax as currently the buyer is required to report these purchases on their state income tax and pay the sales tax in their area. This is not only a fairness issue but will reduce paperwork for small businesses as they will no longer have to keep track of their purchases.

See below Op Ed piece SB Cal wrote in the San Jose Mercury.

Small Business California will be testifying in strong support.

Scott Hauge
Small Business California
2311 Taraval Street
San Francisco, CA 94116

Opinion: Tax policy should not put small business at a disadvantage
By Scott Hauge
Special to the Mercury News

Posted: 03/06/2011 08:00:00 PM PST
Updated: 03/06/2011 08:10:36 PM PST

As the president of Small Business California, I believe in the free market. I also believe that what makes the free market work is that everyone plays by the same rules.

Unfortunately, a tax loophole being exploited in our state hurts small businesses and creates a competitive disadvantage in the marketplace. Out-of-state, online-only vendors don't collect state sales taxes like brick-and-mortar stores are required to do. This loophole has given out-of-state, online-only retailers an unfair competitive advantage over retailers in our own community.

As a result, the brick-and-mortar small businesses that employ our family members, participate in our communities and are critical to our economy's recovery are operating at a loss, and jobs are at risk.

At its core, this is an issue of basic fairness. California businesses are being priced out of the marketplace because they are following the law and collecting the sales tax as required by law. All the while, online-only retail giants like are refusing to collect the sales tax by exploiting a loophole and passing on the liability to remit the sales tax to their consumers, many of whom have no idea the compliance burden falls on them to track and issue payment.

The result has meant that online-only retailers abusing an outdated system to get around collecting the sales tax can offer an artificially lower price. That's not fair, not right and not the way the marketplace should work. It is no way to do business in a 21st century economy.

Fortunately, our state has an opportunity to close the loophole, modernize the system and ensure small businesses are able to compete. Lawmakers can support Assembly Bill 153 by Assemblywoman Nancy Skinner that will require out-of-state, online-only retailers to comply with the same requirements to collect sales taxes that California businesses must follow.

This will ensure the fair and equitable collection of sales taxes by every business, and in the process, provide a critical infusion of revenue for our state and local communities that are struggling to close deficits without raising taxes.

A recent study by the University of Tennessee estimated that this loophole led to more than $3.5 billion in uncollected state and local revenues in 2011-12. By enforcing the existing tax equally on all businesses, government can raise more revenue without raising taxes.

It's time our elected officials stand up for California employers. It's time we all play by the same rules. A sale is a sale is a sale whether it is made online or at the store. Establishing a common set of rules will benefit everyone -- the retailers, consumers, economy and state.

Especially during this recession, we need to be helping, not hurting, California small businesses. The state Legislature now has the chance to help. Let's have one set of rules that applies to everyone, regardless of whether the sale is made over the Internet or on Main Street.

SCOTT HAUGE is president of Small Business California. He wrote this article for this newspaper.


Anonymous said...

The gobblement's out to get all the taxes, fines, and fees humanly possible to feed the public employee unions, prison costs, and illegal/anchor costs.

Anonymous said...

Wake up and get real 3.5 billion in uncollected taxes.
This would represent total retail sales of over $35 billion.
Amazon worldwide sales 2009 = $24 billion. I repeat worldwide sales was only $24 billion.
So why not look at cutting government waste first. Even at 5% it would be a big saving.
As a small business I have seen taxes start out as a small fee only to grow over 3000% in 20 years.
If it looks like a duck ….. its a duck. So don’t make me collect more taxes and do more paper work just so California can give all the state employees better benefits and a solid retirement guaranty on its right to tax me.

Anonymous said...

Dear Business Partners
The State Board of Equlization will bring you to your knees and make you beg for mercy when the auditors come even if all your books are in line. To make us collect and pay out of state internet taxes is just another nail in the coffin of small business. More taxes 8.75% in San Diego. Do you remember 3.75% sales tax on California sales ? I'll bet you do. Mr. Hauge Please advise how to stop the taxation with out representation. I am very busy trying to keep my internet business afloat now. ebay raised their rates to 8+% after Megan lost the election.
What can we do ? Only vote?

Robert Walraven said...

There is a simple answer to the sales tax issue that puts no burden on small businesses and that forces Amazon to collect taxes in California: Have the credit card companies automatically include the tax on all transactions, let them pay all the tax authorities involved, and give them a small cut of the taxes to make it worth their doing this.

Of course this would be better to implement on a national level rather than on a state-by-state level.

Anonymous said...

Just to let you know, I am a tiny online business with a product that is neither produced in California, nor sold at any store in California because it is my own product and I have total control over it. I do sell to California customers, but I am putting notice on my website that I can no longer take orders from California. I am too small financially to be dealing with more paperwork and more tax records. It's a shame, but that' what happens when spending addict governments keep grabbing more money to feed their addiction. You all had better do something about it or your state will be bankrupt. Small businesses understand that concept all too well.