Lawmakers Consider Online Sales Tax

February 3, 2009 7:47:45 PM PST
Many Californians shop online because some sites allow them to avoid paying the state sales tax, saving them money. But many do not know by law they are supposed pay a use tax on their state income tax forms, equivalent to sales tax, for online purchases."Oh yeah, hundreds and hundreds and hundreds of dollars, because I have so many kids," online shopper Gwen Lampman said.

But one lawmaker wants to change that because the state loses out on tax revenue.

Currently, if online retailers, like Amazon.com and Overstock.com, do not have a physical store in California, they do not have to collect the sales tax.

But the proposal says any Web site that pays someone in California a commission for referring customers there, must charge the state sales tax.

It will mean $55 million dollars a year for California.

"Given the budget crisis that we have right now, and our small businesses struggling to keep their doors open, we need a bill like this," Assemblywoman Nancy Skinner said.

State leaders have been struggling for three months now on how to close the $42 billion dollar deficit in the budget.

While the online sales tax would hardly solve the problem, it could help fill the state treasury and boost business at independent book stores within California like the Avid Reader, who has had customers lured away by online retailers.

"This is an extra and unfair burden to them, to not have their competitors having to charge sales tax as they are," book store owner Alzada Knickerbocker said.

Some online shoppers are not thrilled with the prospect of having to pay a sales tax on more sites.

"I think they're looking at it as a money grab, 'Whoa, there's all this money being made over here, let's grab a piece of it,'" online shopper Mandell Davis said.

The New York Supreme Court upheld a similar law, despite a legal challenge from Amazon.com.

That's where California got the idea. The proposal changes the way sales tax is collected, not the actual tax rate, so only a simple majority is needed to pass it.


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