California would extend sales tax collection to many online merchants.
As state governments get strapped for cash, expect them to extend the reach of existing taxes.
NYAffiliateVoice reports about a new proposed law in California that is similar to a New York tax law. New York’s law requires online merchants such as Amazon.com to collect New York sales tax if it has any affiliate program members in the state. New York basically extends its tax collection nexus beyond the traditional meaning of having actual operations in a state.
The proposed California law, California Bill 178, is similar:
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…
California is the center of internet commerce, home to some of the biggest internet brands and affiliate networks. It’s also the world’s 7th biggest economy according to the California Department of Finance.
Technically, residents of California are already required to pay tax on purchases made over the internet. But the new law would require merchants to calculate and pay the sales tax.
When New York’s law went into effect many merchants dropped New York affiliates. This had the perverse affect of lowering the income of many New York residents or forcing them to leave the state, ultimately lowering income tax payments to New York. But if both New York and California impose these rules, expect wholesale changes in the way companies handle affiliates.
[Thanks Joe for the tip.]
Patrick McDermott says
“Technically, residents of California are already required to pay tax on purchases made over the internet.”
Andrew,
New York residents are also supposed to report and “voluntarily” pay sales tax for Internet ,mail order or any other purchase where sales tax is not collected by the Seller.
There’s even a section on the NYS Income Tax form to report those purchases.
Of course, actual compliance is another
story which is obviously why the new law
was created.
Andrew Allemann says
@ Patrick – yes, I think that’s the case in every state. I actually don’t know the specific rules in California but assumed they were similar.
In Texas we don’t have income tax, so it’s more of a pain to report it.
jp says
You are welcome Andrew, thanks for the link.
@Pattrick, you are right, good luck enforcing the new law.
I have to say, dealing with Sales tax in California is a total disasater. This weekend we were updating our sales tax tables on one of my domains, MinkCoats.com. California expects us to track and collect a different sales tax rate for every zip code in the state, and its dependant on the zip code the product was shipped to, not shipped from. Its almost impossible to do without error on a continuing basis. If they make this any more complicated I can’t imagine what would happen. I truly hate dealing with our Board of Equalization. Sometimes I pay my taxes, then get a refund cause they say I made an error, then I get a bill saying I owe them money, then I get it back again saying something to the effect of “Just kidding”.
jblack says
It’s most certainly just a very odd coincidence the 2 states in the worst financial shape are those that have the most oppressive tax structures too.
Andrew Allemann says
jblack – if California didn’t try to make it so damn hard to do business in their state it would be a lot better off.
Lawsen says
the honor system doesn’t always work… I am pretty sure that most don’t abide by it.