The political war over whether or not sales promulgated on the Internet should be taxed the same as those from “brick and mortar” stores has been around for a while.
Main Street businesses, especially in areas such as books, find themselves at an 8-10 percent disadvantage compared to virtual stores. Many of the brick and mortar operations have closed.
Now, Amazon is fighting a new law passed by the California Legislature to collect sales taxes on out-of-state sales that everyone is supposed to pay anyway. Excuse me? Pay taxes on every purchase you make, no matter where?
Yes. It is the law. The basic law of sales taxes is actually called the “Sales and Use Tax Law.” Use taxes are those that include those out-of-state, which are generally not taxed by the seller.
However, despite it having been on the law books for decades, last year only 0.42% of all sales that come under the Use Tax was actually paid. Most of those were for cars purchased out of state because, in order to re-register the vehicle in California, proof of tax payment is required. Other than that, if you pay Use Taxes, you are either one of California’s most upright citizens, or you are an idiot.
That’s because there is no mechanism for the State Board of Equalization (BOE), the body responsible for collecting the taxes, to enforce it. The BOE received $10.4 million in payments in 2009. At that rate, if even a third of the taxpayers actually followed the law, the receipts would be $3 billion. (A nice revenue stream for this beleaguered State.)
To try to gain this income, we have the so-called Amazon tax. Under this law, any company making a sale to any address in California would have to collect the appropriate sales tax and pay it to the BOE. However, California has no jurisdiction over companies located out-of-state, so, immediately after the passage of the law, thousands of California-based companies affiliated with Amazon were cut off. (These are the companies listed by Amazon in the searches they do when you look for a specific product.)
An initiative signature-gathering program is underway by Amazon, to the tune of $5 million and growing, to repeal this law. The supporters of the law, including groups like the California Chamber of Commerce and local Chambers, who have local brick and mortar companies as members, are raising money to fight the initiative.
This one ought to be fun to watch. We are certainly going to hear more and more about it.
The real question is, however, whether there can be a real solution until there is a national policy which brings every state in line. Otherwise, companies like Amazon can pick and choose where they do business and continue the decimation of Main Street. ER
