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The Internet Your Rights Online

California Senate Approves Net Tax Bill 591

Grant Erickson points to this internet.com story, which says "On Thursday, the California state Senate approved a bill that requires businesses with stores in the state to charge their customers sales tax for purchases made over the Internet." The state's huge ($35 billion) budget deficit is named as a driving force for the measure.
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California Senate Approves Net Tax Bill

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  • by dtolton ( 162216 ) * on Monday May 12, 2003 @03:29PM (#5938488) Homepage
    Unfortunately this is something we've all known has been a long
    time in coming. When it comes to the government and collecting
    "their" money, they won't let any opportunity pass them by.

    It will be interesting to see how this will impact online
    retailing though. Not having to pay sales tax has been helpful
    to sites like Amazon for keeping their costs lower than brick
    and mortar stores. Although I think many people don't figure
    the cost of sales tax into the purchase of an item as frequently
    as they should (I know I don't), so it may not have that large
    of an effect.

    One interesting sales tax law in my home state (Utah) is that if
    you buy something from a state that doesn't have sales tax
    (Oregon) then you have to pay sales tax to Utah. Just one of
    the lovely little "bend over and grab your ankles" type of laws
    on the books. I'm hopeful they won't enact the same type of law
    for internet commerce, but I don't have much hope.
  • moving on out? (Score:2, Interesting)

    by sweeney37 ( 325921 ) * <mikesweeney@gma[ ]com ['il.' in gap]> on Monday May 12, 2003 @03:30PM (#5938498) Homepage Journal
    now the question is, will companies relocate to avoid charging their customers the tax?

    Mike
  • by Gannoc ( 210256 ) on Monday May 12, 2003 @03:31PM (#5938508)

    Integrating a system to charge, process and report state taxes, and losing business due to your higher prices,

    OR:

    Moving away from california.

  • by Arcturax ( 454188 ) on Monday May 12, 2003 @03:36PM (#5938566)
    Same with Ohio, you have to declare everything you buy online. But you know what? I don't know anyone who has ever done that.
  • Double Taxed? (Score:3, Interesting)

    by LordKronos ( 470910 ) on Monday May 12, 2003 @03:39PM (#5938595)
    So now what happens for people in Michigan (and perhaps other states)? We are required to report any online purchases (and pay Michigan tax on those purchases) when we file our state income tax returns each year. This includes purchases from other states. How does this get handled if I buy from California?
  • Tax Fast Food (Score:5, Interesting)

    by aSiTiC ( 519647 ) on Monday May 12, 2003 @03:40PM (#5938603) Homepage
    I heard a story here in Oregon on the local news that the Oregon legislator is discussing a tax on fast food. I agree with this kind of tax that same way I agree with taxes on cigarettes and liquor. The state ends up paying for health care for obesity, lung cancer and liver problems.

    However, I think that this internet tax does not have the same kind of reasoning. The internet is bringing revenue in for the state and now the state is trying to find a way to make more money.
  • Heh (Score:3, Interesting)

    by stratjakt ( 596332 ) on Monday May 12, 2003 @03:40PM (#5938607) Journal
    Californians will be the most heavily taxed state in the union inside of a decade.

    Thank Gray Davis and his complete incompetence, but don't forget to give a shout out to the hippies and celebrities who hold so much sway out there.

    I swear to god, there's something wrong with people's heads in that state. I've mentioned before I write police software for a living, and we have some California sites.

    Most municipalities out there have this screwed up system for dealing with false alarms, and it all boils down to: after the seventh alarm, your permit is revoked, you're charged with being a public nuisance. Both of which make some sense, but get this, the police are to no longer respond to your residence.

    I mean, any crooks in LA and it's surrounding counties, theres the hot tip o' the day. Find a business that has had seven false alarms within 12 months (thats a sliding window, not a calendar year), and it's free for the pickins! Smash the window, shoot the owner in the face, the police wont come!

    All because some dipshit politician with his head up his ass thought that the police refusing protection to citizens would be a great cost-cutting measure.

    Of course, the police will still show up. They cant afford not to, there are too many liability issues (imagine the feeding frenzy if some clerk bled to death on the floor of a 7-11 because the police wouldnt come out for alarm #8).

    Bah, that states done. You could fill a library with stupid laws and idiotic political moves in california. Cecede and form Moronia, already.
  • by YllabianBitPipe ( 647462 ) on Monday May 12, 2003 @03:53PM (#5938771)
    I thought Oregonians were "liberal", oh well. Most people who eat fast food are low income; that's all they can afford. Also, have you noticed where a lot of fast food eateries are? In low income or rural areas. All the rich people can afford to shop at Trader Joes and Whole Foods ... the poor folk are stuck eating Big Macs. A fast food tax is a dumb idea, and shouldn't fly if Democratic voters have a clue and can put a and b together. Now an internet tax, that's taxing the well to do, so it's "okay". Not many ghetto kids are buying DVDs online at Amazon, get it?
  • by zericm ( 21972 ) on Monday May 12, 2003 @04:06PM (#5938910) Homepage Journal
    Integrating a system to charge, process and report state taxes, and losing business due to your higher prices,

    OR:

    Moving away from california.


    Seems the best business decision is to abandon the state that ranks first in total population, tenth in per capita income, and fourteenth in per capita disposable income. Indeed, only a fool would want to conduct business in California, a state which accounts for 12.8% of the total disposable income in the United States.

    Source: http://www.bea.gov/bea/regional/spi/
  • by Anonymous Coward on Monday May 12, 2003 @04:08PM (#5938934)
    I wonder how this will effect games like Everquest, who's servers are based in CA. I am not sure if any-other online games are based out there, but it will be interesting to see if the price will go up.
  • Re:uh.. (Score:2, Interesting)

    by NiZm0 ( 108526 ) on Monday May 12, 2003 @04:14PM (#5938998)
    I got caught by the WI IRS for use tax evasion. Fortunately for me, they were nice and just wanted their money on a "voluntary basis" rather than a full audit. I paid the money and interest of course. I won't mess with the tax man.

    In WI and I believe just about every other state, we have something called "use tax". Basically it allows the WI IRS to creatively get around the law that prevents states from taxing out of state purchases directly. I know it is a sales tax, the WI IRS knows it is a sales tax, but they call it a use tax. You pay the use tax when you file your taxes for the year.

  • by mblase ( 200735 ) on Monday May 12, 2003 @04:17PM (#5939023)
    Also, I really don't see how the net is so special that things you buy over it shound't have tax on them.

    It's not net sales, it's interstate sales. If you ever buy something online from a company that ships it from your same state, your liable for sales tax according to that state's laws. But once the product crosses state lines, that's interstate commerce which, according to the U.S. Consititution, only the federal government can regulate. Not all businesses *do* charge for same-state online purchases, even though they're legally expected to do so. They just haven't been caught.

    This has applied forever to catalog sales, but the recent boom in Internet commerce has made it a much bigger financial loss for businesses in certain states. The net result, I imagine, is that businesses that can afford to will simply move their warehouses to Nevada or some other state that lets them offer better deals to their customers. (Mind you, this will probably be fewer businesses than you might hope.)
  • by mdfst13 ( 664665 ) on Monday May 12, 2003 @04:18PM (#5939031)
    They don't necessarily make money from the business income. Most of the business income tax will be paid in the state in which they are headquartered, not the state of the sale. That's why they are so aggressive about this now. Half the parties who must pay this are from other states (i.e. can't vote against them).

    Don't tax you; don't tax me;
    Tax that other guy behind the tree.

    Btw, if we want to reduce multiple taxation in the US, why don't we replace sales and business income taxes with a VAT (value added tax, which taxes the difference between revenues and costs per item)? It accomplishes the goals of both taxes more smoothly and is harder to evade.
  • Re:moving on out? (Score:5, Interesting)

    by Flounder ( 42112 ) * on Monday May 12, 2003 @04:18PM (#5939035)
    Barnes and Noble (the B&M book stores) and BN.com (the web site) are indeed separate and distinct companies. I wonder how this ruling will affect them.
  • Re:Money's a drug (Score:0, Interesting)

    by buswolley ( 591500 ) on Monday May 12, 2003 @04:30PM (#5939153) Journal
    people like to package problems into stereo types. Those immigrants pick your fruit you dumb bastard. how about stopping politicians from selling out to corporatiosn, like the California energy crisis where we got screwed in the ass behind doors. the rich get rich, and the poor..well you only can own so little as nothing. and then some.
  • by Andy Dodd ( 701 ) <atd7NO@SPAMcornell.edu> on Monday May 12, 2003 @04:45PM (#5939323) Homepage
    The typical rule has been: If your company has a corporate presence in the customer's state, then the customer has to pay their sales tax. (This is why Dells have sales tax no matter what, even if shipped interstate, because Dell has a corporate presence in every state.)

    Every company I've ordered from in California charges California sales tax for California customers. The Cornell Campus Store in Ithaca, NY charges 8% sales tax within Tompkins County, 4ish percent elsewhere in NY State, and 0 tax elsewhere. (It seems like NYS has independent state and county sales taxes.)
  • by dlm3 ( 626205 ) on Monday May 12, 2003 @05:07PM (#5939561)
    If I understand correctly, the problem with electric utility competition in California was that (1) there are only a limited number of lines into the state which are controlled by a small number of suppliers; (2) there are very few wires connecting areas in the state; (3) the state has prevented construction of new power plants in-state for two or more decades for various reasons. Without significant competition, the power-generators and transporters jacked up the price to all the market would bear - as they should - they're not in business to give away their product.

    Gray Davis' solution to this was to buy electricity in large blocks, coinciding with the peak of the market, to essentially subsidize per KWH rates to consumers, rather than allow the market price of electricity to float with the costs. Much the same as price controls on gasoline caused shortages in the 70's. Had the price not been controlled, the users with the highest consumption would have been forced to cut back their consumption or make themselves more efficient.

    Granted, price per KWH went up drastically, but it's not just the greedy bastards who own the power generators who were at fault. The self-centered politicians who prevented (with the enthusiastic support of certain pressure groups) construction of new power generating facilities in-state, who refused to permit construction of power lines from out of state, the large industrial users who were getting power at subsidized (rather than real) rates, and so on.

    There's plenty of blame to spread around, in other words - but the taxpayers of California are taking it on the chin for the state's malfeasance. Again.

    Glad I don't live in CA, though I do live in a state where the 1990's spending hangover in the state legislature is just beginning to rear its ugly head, and both Republicans and Democrats are vying to figure out which tax they ought to raise to solve their problem.

  • by Anonymous Coward on Monday May 12, 2003 @05:38PM (#5939863)
    In Theory, you are required to pay "USE TAX" on all items used in any location
    That's what the states (and even newspaper columnists) keep saying. Funny how they ignore the U.S. Constitution, which (a) prohibits states from taxing exports, (b) explicitly prohibits states from taxing imports without the consent of Congress, and (c) requires that the net proceeds of any such tax go to the U.S. Treasury (NOT the state treasury).
  • by JJahn ( 657100 ) on Monday May 12, 2003 @05:40PM (#5939886)
    You bet, this is something I learned when I started my business while researching tax laws. If you buy something from an out-of-state company you are by law required to pay tax to your state.

    It's just that most people (unless they are businesses) don't ever bother.

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