California Small Businesses Rise Up Against Proposed Internet Tax
Facing huge budget deficits and still struggling economically, the California assembly has passed an internet tax to increase state revenues. The proposed bill, ABX1 28, seeks to collect sales tax for goods purchased online by extending the online seller's "nexus" to include affiliate marketers who drive traffic to the seller's site.
Unfortunately, the net effect of the bill would not be to increase tax revenues, but to drive affiliate marketers out of state rather than to jeopardize their ties with retailers like Amazon, who most likely would sever ties with them rather than be forced to collect sales tax.
As the issue rear its ugly head, 25,000 Californian small businesses affected by the proposal made known their opposition to the budget trailer bill. Unlike the internet sales tax proposal dubbed the "Main Street Fairness Act" which would level the online vs. brick and mortar playing field by requiring sales tax to be collected on all internet purchases by residents of states with relevant sales tax, the California bill's extension of nexus would only result in retailers like Amazon dropping Californian affiliates just as they did with Arkansas and Connecticut after "Amazon tax" legislation was passed by those states.
Even if the coalition of small business in California succeed in getting Governor Jerry Brown to veto the legislation, the issue of the internet sales tax isn't going away. Despite being a regressive form of taxation, sales tax is a quick and easy way for states to increase revenues and balance their budgets and billions of dollars are being left on the table as online retailing achieves exponential growth.
In addition, many traditional "brick and mortar" retailers are also championing an internet sales tax to eliminate the unfair advantage online retailers have with consumers looking to save money by buying online to avoid sales tax--even though by law they are required to report those purchases and pay what's known as a "use tax" on them when they file their state income tax returns.
How do you feel about the internet sales tax issue? Is it time to level the playing field between internet-only and retailers with physical locations? Or should the internet remain a tax free zone?
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