Senate Attempts to Follow New York in taxing Online Purchases

I’ll be on KOGO radio with San Diego U-T editor and blogger Chris Reed at 6:35 this evening. You can listen online or catch it on the radio in San Diego at 600 on your AM dial.

The internet, 15 years into its serious commercial life is still something of a wild west. In theory, sales tax (or its counterpart the use tax) is supposed to be paid on all purchases.  In practice, it’s only paid where the stores collect it.  While the state has begun making a push for Californians to pay use tax on products that they buy from online stores, few  people  actually do so.  I’ll admit that keeping track of my online purchases is a pain in the butt. I just end up guessing and paying on that guess. But, I’m just guessing here, but I bet I’m in a pretty small minority here.

New York has gone the additional step of requiring Amazon and other online companies collect and pay that tax.  Amazon, and fellow online retailers, aren’t so enthused. From Amazon’s website:

Effective June 1, 2008, LLC will begin collecting sales tax on items shipped to destinations within the State of New York as New York has enacted a new law requiring out-of-state sellers to collect and remit sales tax based on advertising. Amazon has filed a lawsuit challenging the constitutionality of this provision. However, as required by the law, we must still begin collecting New York sales tax beginning on that date.

Please note that if you place an order prior to June 1, 2008, your Order Total may not include an estimate of New York sales taxes, but those taxes may still be charged if your order is readied for shipment on or after that date.

But what does Amazon have against this practice? Is it too challenging for them to do the work of collecting taxes? Not really, at this point, payment processing systems can be programmed fairly easy to collect and submit sales taxes.  

No, at this point, it is completely about the online stores’ efforts to undermine local businesses.  They believe that their purchases should not be subject to taxes, while if you go down to the local bookstore, you have to pay up.

Perhaps the idea made sense when the Internet was a struggling venture. is now the world’s largest book retailer.  More music is sold online than off.  The internet does not need any more boost through accounting trickery.  These stores should be collecting taxes.

While the loss to the states is relevant here to the budget, of equal, if not greater, concern is the loss to local companies. They have to collect the taxes, and then are left with seemingly higher taxes. It’s about time that we level the playing field. Let internet and brick and mortar retailers at least compete on a level playing field. Local businesses already contribute more to the local economy in jobs and recirculating money, why would we tie an arm behind their backs?

Meanwhile, Arnold Schwarzenegger continues to oppose small businesses right here in California, and says he plans to veto the measure if it gets to his desk.

10 thoughts on “Senate Attempts to Follow New York in taxing Online Purchases”

  1. It’s not like the on-line retailer is paying the tax.  There really is no reason for Der Gropenfuehrer to plan a veto, and it’s not as if local business,any-town California couldn’t use a break.  

    Let’s hope that this reasonable and timely revenue generating measure gets support from both sides of the Leg., and both parties.  (fingers crossed)

  2. The problem here is that there is a long history of preventing state governments from reaching into other states.  New York’s enactment of this law means that it can reach Amazon, which is located in Washington State.  California already reaches across state lines.  An example follows.

    I have purchased a number of sets of DVD’s of PBS programs from Amazon.  As an example, let me use “Rumpole of the Bailey”, a Thames Television (UK) production, which was then shown on PBS here in the States.

    If I wanted to sell those DVD’s at a garage sale or in some other manner, I would run afoul of California law.  California law requires that all CD’s, DVD’s, and the like have on the packaging the name and address of the manufacturer.  The “Rumpole” DVD’s contain no such information on the packaging.  If I were to offer them for sale, I would subject myself to felony prosecution.

    It is, of course, the arrogance of California’s Legislature (and their heavy contributions from Hollywood) that this legislation is referred to as “anti-piracy”.

    Not only can I not sell my own personal set of DVD’s, no store in California can legally sell these DVD’s new because they do not have printed on them the required information.

    It is just like California to believe that this state should be permitted to dictate what goods should look like when sold in the other 49 states.

    This violates the Commerce Clause of the U. S. Constitution, incidentally.  It is arrogant and unconstitutional.  It is also too expensive to challenge for any one individual.

  3. Your inter-state commerce argument is laughable on it’s face. I fail to see how this affects anything other than California sales tax. It’s not like California would dictate the taxation of a purchase in any other state. However, if you believe that any attempt to increase desparately needed revenues, and provide an opportunity to level a playing field for in-California brick and mortar businesses – have at it.

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