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The Internet Your Rights Online

California Senate Approves Net Tax Bill 591

Posted by timothy from the taxation-taxation-taxation dept.
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 More

California Senate Approves Net Tax Bill

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  • That is the sound of inevitability.... (Score:5, Interesting)

    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.

    • Re:That is the sound of inevitability.... (Score:5, Informative)

      by stanmann ( 602645 ) on Monday May 12, 2003 @03:35PM (#5938552) Journal
      Actually, all states have that law... and most states have procedures to reclaim taxes paid in that state for items "used" out of state. Check your local law. In Theory, you are required to pay "USE TAX" on all items used in any location, MOST states empower merchants within that state to collect the USE TAX and refer to it as SALES TAX.
      • 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.

    • Re:That is the sound of inevitability.... (Score:5, Interesting)

      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.

    • Re:That is the sound of inevitability.... (Score:5, Insightful)

      by cmburns69 ( 169686 ) on Monday May 12, 2003 @03:40PM (#5938604) Homepage Journal
      It's a never ending battle between the republican types (who hate government involvement) and the democratic types who want more centralized/governmental control.

      While I think that there is such thing as "too much taxes", I don't think we're there yet. The only problem with this system (IMHO) is that when each state has their own laws, it will become very difficult for small businesses to conform and collect the proper taxes for each state.

      If the states want money from online sales, propose a federal tax, whose money would be split between states proportional to the ecomerce that is done in each state.

      While the system wouldn't be perfect, it would be a huge step up from 50 separate laws!

      An online Starcraft RPG? Only at [netnexus.com]
      In Soviet Russia, all your us are belong to base!

    • Re:That is the sound of inevitability.... (Score:5, Insightful)

      by jmv ( 93421 ) on Monday May 12, 2003 @03:40PM (#5938609) Homepage
      When it comes to the government and collecting
      "their" money, they won't let any opportunity pass them by.

      Well, it's still *your* money. They either take it this way or another way. The effect is the same. Also, I really don't see how the net is so special that things you buy over it shound't have tax on them. The exception might have been good for a while to promote buying over the net, but I don't think it's necessary anymore.
      • 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,

      • Re:That is the sound of inevitability.... (Score:5, Informative)

        by JustAnotherReader ( 470464 ) on Monday May 12, 2003 @04:31PM (#5939155)
        I really don't see how the net is so special that things you buy over it shound't have tax on them.

        The thing is, mail order has been exempt from this forever. Ordering online is the same thing as ordering over the phone from a catalog. So there is a long standing precedent of not taxing people from outside of your state with your sales tax.

        Now, being a Californian I have another point I'd like to make. When Davis came into office we had the biggest surplus in all of Californian history. At the end of his first term we now have the biggest deficit in our history. Were did all that money go?

        It went two places: First, in typical political short sightedness our government started spending spending spending on various new government programs. How soon they forget the lean times.

        Secondly, we deregulated our utility companies. However, they were deregulated without adequate competition. Deregulation was suppose to make prices go down. But since the same companies owned both the electricity generating companies (Like Sempra Energy) and the delivery companies (Like San Diego Gas & Electric) the greedy bastards took advantage of this new cash cow. The companies that use to make a profit when our electric bills were $75 to $100 a month tripled our electric rate (sometimes higher). My personal electric bill went from $78 one month to $224 the next.

        So what does our governor do? Does he take over the generating plants like he threatened to do? No, he makes a deal with the electric companies to pay them off via the state's general fund.

        So our huge surplus of ca$h went not to civil programs, not to a savings account that would generate interest for future lean times, not to tax rebates for those of us who paid them the money, it went back to the electric companies who were screwing us in the first place.

        So thank you so very F*cking much Mr Davis! You've taxed us, you screwed us, you got in bed with the electric companies and screwed us again, and now you're going to tax us some more.

        That's why many of us are trying to recall the Bastard. [recallgraydavis.com]

        You know, everybody seems to be asking how the nation can afford another tax cut. But nobody ever ask me if I can afford another tax increase.

    • I believe that taxing mail or internet orders is a violation of the interstate commerce clause of the constitution, but since that document is essentially used like a baby-wipe by politicians across the spectrum, it's unlikely that will stop this from happening.

      • Re:That is the sound of inevitability.... (Score:5, Informative)

        by pyros ( 61399 ) on Monday May 12, 2003 @04:03PM (#5938880) Journal
        As myself and others have already stated, the bill is to impose sales tax when the merchant is selling to a customer in California. You will only have to pay sales tax if you live in California and are buying from an online merchant with a physical presence in California.
        • 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 elsewh
    • > 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.

      As opposed to, say, cutting spending, where the thugs that run Kalifornistan never miss an opportunity to miss an opportunity.

      Even with a $35B deficit, no sirree, we gotta give the prison guards a couple billion dollars in raises. They gave money to the Guvnah, y'know. Unlike those fuckin' teachers.

    • >>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.

      Well, here in Canada taxes add up to as much as an additional 15% on retail sales (7% Federal tax (GST), 8% Provincial tax (PST, depending on province)). If they did something similar here, it would KILL a lot of online sales.

      MadCow.

    • Now it remnants are being wiped from the glass. Online retailing has been a victim of its own success, anything that is popular gets taxed.
    • Something's wrong. You didn't say "frist prost". This is unpossible!

  • moving on out? (Score:2, Interesting)

    by sweeney37 ( 325921 ) *
    now the question is, will companies relocate to avoid charging their customers the tax?

    Mike

    • Re:moving on out? (Score:5, Insightful)

      by NetSettler ( 460623 ) <kent-slashdot@nhplace.com> on Monday May 12, 2003 @03:38PM (#5938592) Homepage Journal
      Doesn't California have a state income tax? Why isn't it enough that the state makes money on the income of the business that is able to make the sale? I've never understood this. How many different ways does the government have to tax the exact same transaction before it becomes too much?

      • Re:moving on out? (Score:5, Insightful)

        by Tackhead ( 54550 ) on Monday May 12, 2003 @03:53PM (#5938776)
        > Doesn't California have a state income tax? Why isn't it enough that the state makes money on the income of the business that is able to make the sale? I've never understood this. How many different ways does the government have to tax the exact same transaction before it becomes too much?

        *applause*

        Let's see - we have a two-year boom in capital gains tax collections (oh yeah, you non-Californians probably don't know that we pay an extra 9.3% state tax on top of the 20% federal rate for long term capital gains), so we jack up spending by 40%+ over a term.

        Then, when boom turns to bust, we're shocked - shocked, I tell you! - that revenues have fallen. But there's an election coming up, so we keep spending.

        And taxing. Mandatory health insurance? Sure, why not fuck over the few remaining businesses in the state, they've got money! Jack up the taxes on employers for extension of maternity leave, too! Money grew on trees during the dot-com boom, the private sector obviously has an infinite supply of the stuff, so what's another 1-2% of that infinite supply when there's prole votes to be bought?

        In answer to your question, "n+1", where "n" is the number of ways a given transaction is taxed in the preceding election cycle.

        In Nevada, there's no state income tax, and there are places where you can walk down the street with a beer in one hand and a cigarette in the other.

        In California, you pay the highest taxes in the nation - higher than most of Canada - and soon, you'll need proof of age-21 to purchase dangerous foods like cigarettes, beer, and now Oreo cookies [sfgate.com].

        Atlas, if you're listening, it's time to shrug.

      • 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 ad

    • Oregon doesn't have a Sales Tax (Score:4, Insightful)

      by Colonel Panic ( 15235 ) on Monday May 12, 2003 @03:44PM (#5938667)
      will companies relocate to avoid charging their customers the tax?

      They should move on up to Oregon; we don't have a sales tax and we've got a lot of people who would like to have a job.

    • Re:moving on out? (Score:5, Funny)

      by yintercept ( 517362 ) on Monday May 12, 2003 @03:45PM (#5938681) Homepage Journal
      I think California figures that it is simply too difficult to move a web site. Once you get all of those internet requests aimed at a particular state, ecommerce aren't going to just dig up and move their address. Think of all the heavy machinery and man power it would take to point a domain from one state to another!!!

      It is interesting to see California leading the way to in the sales tax fray...since the net has done a pretty good job of transferring wealth from other states in Ca. Only in the last year have other states begun making good inroads onto the web.
    • Are taxes collect at the POS (point of sale)?

      In otherwords, if California businesses jumped over to Nevada for ISP/Mailing addresses, and shipped from California warehouses would they avoid the taxes.

      All I know .. is that Newegg.com has lost some of its edge. Nice .. one example of Midwest money that will now be staying in the midwest .. or even head east.

    • Re:moving on out? (Score:3, Insightful)

      by Glock27 ( 446276 )
      now the question is, will companies relocate to avoid charging their customers the tax?

      Yes.

      California (my native state, and where I reside for the moment) appears to be trying to tax its way out of its deficit.

      This will of course fail miserably, because smart business owners will get the hell out of Dodge. It is already far more expensive to do business here than in most other states. The state legislature aggravated the problem quite a bit recently by passing legislation requiring any business with m

  • What would be cheaper... (Score:5, Interesting)

    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.

    • That's not an option for businesses like Barnes & Noble, Toys R Us, etc, that have retail shops in California. Those guys would have to have the sales tax, even if the internet part of their business was run from somewhere out of state.
      • If the internet part of their business is run from somewhere besides California, they moved the primary HQ away from California, would they still have to charge a non-californian resident sales tax for California merely because they have some retail shops there?

        If the customer is in a different state that also charges internet sales tax and the internet store has retail shops in THAT state, which state gets the sales tax? The customer's home state?

        If it IS the customer's home state, then does CA only cha
    • On a similar note, that's half the problem with New York & big business. (At least upstate New York).

      We've got cheap land to build on, lots of skilled labor in every discipline from EE, to CompSci, to Manufacturing & BioTech. Cost of living is in the 70-80 percentile (100 is national average).

      Problem is business is taxed out the ass once they set up shop. The only way to keep business is to give them tax breaks, and then jack up sales tax (going on 8.75% in some counties), or property taxes (10
    • 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/

      • Re:What would be cheaper... (Score:5, Informative)

        by Doomdark ( 136619 ) on Monday May 12, 2003 @04:29PM (#5939133) Homepage Journal
        Seems the best business decision is to abandon the state that ranks first in total population...

        Your point would be valid if he was suggesting a brick-n-mortar shop closing stores and moving out, but I thought he meant just moving operations (web site & supporting infrastructure) out of state. And having all those rich numerous californians as customers, serving them through the very same web site, but just having employees and servers located someplace else. While there are no doubt measures in there to make it more difficult (esp. for 'mixed' companies that still have physical existence) to avoid taxing, it's quite likely many pure net retailers might consider moving to another state. And considering cost of living at CA is also very high, salaries high, leading to higher personnel costs, does that sound all that unlikely? For this to work out for companies, though, they better hope neighbouring states do not follow (as then distribution centers could be located near state borders).

        Note that many 'traditional' companies shuffle their HQs and operations from one state to another, sometimes due to change in leadership (CEOs want "their" company to "their" state), or due to tax incentives poorer states offer... headquarters especially are moved pretty often (even big companies like Boeing that asked for bids from 3 cities a while ago, and chose best offer, Chicago). And since for net retailers things should be even easier to move -- they usually don't have assembly plants or factories to move, at most just distribution centers -- it should be even more tempting to try doing just that.

        Basically, California as a market will still be tempting; but that's different from suitability as "home state".

  • Ok, No big deal (Score:5, Informative)

    by stanmann ( 602645 ) on Monday May 12, 2003 @03:32PM (#5938526) Journal
    This only affects people who live in CA and buy from California merchants. So this isn't going to affect the rest of us. Personally I don't see what the big deal is... California can't charge sales tax to "non-residents" because as yet the constitution still identifies interstate commerce as non-taxable.

  • Ahhh, legislators... (Score:2, Funny)

    by Anonymous Coward
    They'll tax anything except their brains.

  • Recall Gray Davis (Score:3, Informative)

    by Jeffrey Baker ( 6191 ) on Monday May 12, 2003 @03:33PM (#5938537)
    If you don't think a US$1,000 per capita budget deficit is reasonable, you too can Recall Gray Davis. [google.com]

  • uh.. (Score:5, Informative)

    by pyros ( 61399 ) on Monday May 12, 2003 @03:34PM (#5938538) Journal
    Hasn't it been the case that no tax when buyin online was really just a myth to begin with. We were all supposed to be taking it upon ourselves to pay the taxes in our home state. It just wasn't ever enforced. I've seen plenty of online retailers charge tax if the shipping address is in the same state for the past few years. (megahaus.com in texas is the only one that comes to mind at the moment though)

  • YEAAAA!!! (Score:5, Funny)

    by GMontag ( 42283 ) <gmontag.guymontag@com> on Monday May 12, 2003 @03:34PM (#5938543) Homepage Journal
    More business for the rest of the country!

    Yes, Californian .com business, come to sunny Iowa/Ohio/Tennessee/Virginia/etc., your tax free havens! Feel free to bring all of thos employees with you, along with their salaries and credit reports.

    Plenty of houses here and we have electricity year round!
    • Ohio has laws saying you have to pay tax on internet stuff already. Of course you are supposed to declare it yourself, but no one ever does. That could change in the future though as states start to lean on companies to charge tax.

      Apple computer charged me Ohio sales tax on my G4 Powermac even though it was shipped from California. However also have offices here in Ohio so that might be why.
      • Dell charges State sales tax in Tennessee, so okay, amendment to earlier post: everybody that is not out here already move your data centers here and keep the warehouses in another State or something!
      • That is exactly why they charged you taxes. They have an in state presence and are required to collect and report the local taxes on your purchase. This is the same in any state that the company has a local presence. If you read the article you'll see that California is fining Barnes and Noble for not collecting local taxes on Internet sales even though the company has a local presence.

  • At least now (Score:5, Funny)

    by select * from ( 593191 ) on Monday May 12, 2003 @03:34PM (#5938544)
    At least I can use this as an argument to convince the wife to allow me to go on a mass spending spree on newegg.com before it goes into effect.

  • This is nothing new, right? (Score:4, Insightful)

    by IsoRashi ( 556454 ) on Monday May 12, 2003 @03:35PM (#5938554)
    I thought it was already the case that businesses who performed business over the Internet (or through catalogues or whatever) had to charge sales-tax as long as their business had a physical presence in the state?

    E.g., I live in NJ, I buy from a company that has no physical business presence (i.e. a store-front or hq or warehouse) in NJ. I am not charged sales-tax. Legally, I am required to declare these items when I do my income taxes for the year and pay the sales-tax then. If I buy online from a store that exists in NJ (e.g., Best Buy), then they must charge sales-tax and that amount is included in my bill.

    Maybe this is just NJ, or maybe I'm just confused. Any lawyers/accountants who can shed light on the matter?
  • That if I as a European purchase something from an online store in California I must pay sales tax to the state of California ?

  • customer perspective (Score:4, Insightful)

    by StandardDeviant ( 122674 ) on Monday May 12, 2003 @03:35PM (#5938560) Homepage Journal
    (tongue firmly in cheek:)
    Hm, so if I buy things from stores that charge me California sales tax am I eligible to get a vote in California in addition to my Texas one, and get Californian social services as well as Texas ones? Could I transfer from UT-Austin to UCB without losing instate tuition status?

    If not, this is taxation without representation.
    • Hm, so if I buy things from stores that charge me California sales tax am I eligible to get a vote in California in addition to my Texas one, and get Californian social services as well as Texas ones? Could I transfer from UT-Austin to UCB without losing instate tuition status?

      If not, this is taxation without representation.

      I know you were joking. But if I fly out to Austin and buy something, I would have to pay Texas sales tax and yet not be represented. Likewise, if you fly out to LA you will have to
    • On the other side, if I have to pay Texas sales taxes on purchased from Texas, does this mean I am under Texas Justice. Great, now I have to give up my habitual Jaywalking or face the Death Penalty in a Texas Prison.
  • Seems like a large percentage of stores on Pricewatch are California based. This tax ought to hurt them a bit. This is, of course, a geek's analysis of where the tax will hurt us :)

  • This changes nothing (Score:5, Insightful)

    by unfortunateson ( 527551 ) on Monday May 12, 2003 @03:37PM (#5938575) Journal
    As the article says, it only changes enforcement of the laws on the books, and maybe broadens existing rules just a bit: service and other facilities within the state now count as brick & mortar to cause you to be responsible for in-state sales tax.

    Amazon already keeps its distribution facilities in Oregon and Nevada for just this reason. They might get caught if they have a supply/delivery depot set up for same-day delivery in LA.

    This is mainly to put some muscle into collecting from folks like Wal-Mart, Barnes & Noble and Borders, who claimed to have separate businesses running their internet. The new law states that the same 'brand name' is a trigger for tax collection.


    • What they are saying is "we don't care if you are seperate businesses, if you have the same name we will tax you anyway"???????

      What kind of nonsense is this? What if I licensed the "brand name" of a brick and morter for my e-biz? Now they have to pay taxes on my sales? Damn STUPID money grubbing "public severents"......

  • If you already live in California (about 1/6 of the population of the USA does) then this bill doesn't affect you.

    This is sort of like the massive tax on hotel rooms. Tax people from out of town, because they can't vote against the politicians levying the taxes!

  • 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?
  • This has been the case all along. Any customer living in your province had to be charged the provincial sales tax. Any person living in Canada had to be charged GST.

    This is nothing new up here in the North, I'm surprised it took this long to implement.

    I also don't think it will have much effect on businesses since for many, Internet sales only account for a small portion of the sales.

  • 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.

    • That is a tax on the poor, no way (Score:4, Interesting)

      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?

      • Re:That is a tax on the poor, no way (Score:5, Insightful)

        by aSiTiC ( 519647 ) on Monday May 12, 2003 @04:19PM (#5939044) Homepage
        I have to disagree. Fast Food is NOT a cheap way to eat. I have a roommate that only eats fast food and it costs him approximately $15-20 a day to eat. I on the other hand make all my food. I eat granola, apples, bananas, lentil soup, stir-fry, etc... I spend $150 a month on this diet that is very healthy. The only downside is I have to spend time preparing my meals.

        I think you're arguement just says that this kind of tax is a tax on stupidity and laziness which I have no problem with.....

    • Re:Tax Fast Food (Score:3, Insightful)

      by Zirnike ( 640152 )
      "I agree with this kind of tax that same way I agree with taxes on cigarettes and liquor."

      So do I. Of course, I strongly disagree with your position. Why? Your 'the state pays for health care' doesn't hold water, as you live in the US (no state health care).

      It's just a classic case of the usual crap. "I don't like what you're doing, so I'll be sanctimonious and tax/ban it."

  • 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.
  • Why didn't they have a law like this in place already? Most have had one in place cince the 50's covering anything bought by mail order and the company has a presence in that state then sales tax must be collected.

    From what I can tell from online purchasing, the other 49 states have had this a really long time..

    Now, if they are trying to tack on extra taxes... like yes you are in michigan and we have a store in michigan so on top of the michigan sales tax you have to pay california sales tax?

    It's reall
  • I think the accounting overhead is worse than the money bite with most taxes. They should just raise property taxes or something that's not so hard to keep track of. As it is this just creates more government jobs to attempt to enforce this.
    • Ah, but the accounting overhead is on the individual companies, and therefore, on the consumer, not the state. So why should they care? (hint: think like a politician, not a rational human being)
  • The worst thing about the California Legislature is the fact that there is NO oposition. The democrats are in control of the whole thing. Senate, Assembly and the Govenorship.

    And you know when money is short the easiest and quickest way to PISS OFF only "rich people" is to raise taxes. That is right, PISS OFF the people who MAKE the economy.

    Instead of trying to control spending, the democrats only solution is to raise taxes, drive business out of the state, and give away services to people who don't contr

  • This could be bad for Californias tech industry... (Score:3, Insightful)

    by Dutchmaan ( 442553 ) on Monday May 12, 2003 @03:42PM (#5938645) Homepage
    Much of my computer equipment is bought from online companies in California... a tax on computer equipment would probably be enough to drive people who purchase in bulk elsewhere..

    Hell if the same item costs less somewhere else..thats where I'll go...

    Good luck Cali, this is a true gamble.
  • ... We don't have a sales tax up here and there are lots of folks desperate to find work.

  • Very Simple Solution (Score:3, Insightful)

    by Jerk City Troll ( 661616 ) on Monday May 12, 2003 @03:48PM (#5938711) Homepage
    This is a bad idea. I don't think I need to explain why here -- that's preaching to the choir. The question is what to do about it and I think it's simple:

    If you go to an online vendor, and you notice they're located in Califorinia, go someplace else.

    There's countless online retailers and even if plenty of them are located in CA, you've got plenty of options left over. From time to time, it may be inconvenient, but it shouldn't be that bad.

    Remember that if you demonstrate that new taxation like this increases revenue for the state, others will follow. Slashdot has got to represent a significant portion the online market: let's make sure other states don't do the same.
  • I dont see what the big deal is, everybody I've purchased from online who is in California has already been charging sales tax since I'm a resident.

  • Again California shoots off its own foot. (Score:5, Insightful)

    by Ungrounded Lightning ( 62228 ) on Monday May 12, 2003 @03:48PM (#5938721) Journal
    "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."

    If this goes into effect, what will the effect be? Simple.

    California's sales tax is typically over 8%. (It varies by location, because cities and counties are allowed to add on their own small deltas.)

    So the result will be that companies which are primarily net retailers will CLOSE ANY STORES THEY HAVE in California. Standalones will move their operations to other states. Even large retail chains with an internet sales outlet may split into subsidiaries.

    8ish percent of gross is a LOT in a heavily-competitive market. And the WHOLE POINT of buying something on the Internet is that the price differential must be more of a draw than the lack of a local facility is a repellant. So if a company has to charge an extra 8ish percent if it continues to have a presence in the state, it will, if at all possible, eliminate its presence in the state, rather than watching the bulk of its business switch to its competitors or just go away.

    The net effect on California's budget will be negative. It will lose more in taxes, on store sales, employee income taxes, and other taxes on the businesses that fold up and move (or die) than it collects. It will also incur extra costs from the business shutdowns - such as unemployment and/or other social program costs for workers that don't move to follow the business.

    ==========

    If this also passes the assembly it will almost certainly be signed into law - because Gray Davis is clueless about anything financial. (Witness his reaction to the "electric deregulation" debacle.)
  • Those of us in Minnesota always pay taxes on goods purchased over the internet or otherwise. It is called Use tax [state.mn.us], and the idea is it protects our local business - while generating revenue for the state as an after thought... (I don't buy it either)

    Nothing here to see - move along...
  • Let's see: if I buy on line from a store like Best Buy, that has stores in California, but elsewhere as well, and live in another state, I pay California sales taxes? What happens when other states inact similar taxes? Will I have to pay sales taxes to each state hosting a Best Buy store?

  • They are just following the old rule... (Score:5, Insightful)

    by dvk ( 118711 ) on Monday May 12, 2003 @03:52PM (#5938757) Homepage
    "Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it."
    - Ronald Reagan

    Of course, the rulers of the Peoples Republic of California filed to notice that Reagan didn't mean this as an advice.

    -DVK

  • Consumer: Don't buy from CA (Score:3, Insightful)

    by shokk ( 187512 ) <ernieoporto@nOSPam.yahoo.com> on Monday May 12, 2003 @03:52PM (#5938768) Homepage Journal
    If they choose to enforce this law, then you as the consumer can choose to not purchase over the Internet from companies in California. Plenty of others to choose from and I doubt the law stands if things get worse because of public outcry. Too many people think of the Internet as something that will inevitably fall to taxation, when I say it laid the first ground for no-tax laws. Make your voices heard people, or just pay your sheep tax.

  • A Clarification... (Score:4, Informative)

    by geekwench ( 644364 ) on Monday May 12, 2003 @04:07PM (#5938920)
    As I read the article, it becomes clear that this is not a new tax; merely a further enforcement of an existing one. Most states (as far as I know) which have a sales tax are required to collect taxes on sales made in the state where the business is located, no matter the venue of the sale (online, catalogue, brick & mortar, fax/phone, carrier pigeon, et cetera.)

    I live in Colorado, and I have a small business. I'm an artist. If I sell a piece via the internet to someone here in CO, I have to colect sales tax; just as if the purchase had occurred face-to-face at an art show. Why? Because my business is located here. If that same purchase is made by someone in, say, NJ, no sales tax is charged. I don't have a business presence in NJ. Simple as that.

    I have heard a lot of discussion about taxing all internet-based purchases, and I think (hope) that two things are going to prevent such a thing from taking place. First is the sheer scope of such a proposal. Collection and distributing the taxes would be a logistical, not to mention jurisdictional nightmare. Who gets what percent? Are states experiencing budget shortfalls entitled somehow to a bigger slice of the pie? Or does the whole thing get gobbled up at the Federal level? It's the sort of monkey wrench question that would make even the most dedicated tax lawyer blench.

    Second, and more important, is the constitutionality of such a measure. If I don't reside or have a business presence in NJ, why in the hell am I paying a sales tax into their coffers? In a nutshell: no taxation without representation.
    (Yes; I know about the sorry example of Washington, DC. Don't get me started on that one. So far as I'm concerned, it just proves my point.)

  • Stupid, stupid move.

    All these CA companies who had good internet sales now charge 6-8% more than any other site. They'll lose a fair portion of those sales. Their overall profit now decreases, which means they do not have as much income. Now CA still does not collect much of the sales tax - but it also has killed off a portion of the corporate income tax. To top that off, already struggling companies will lay off more people since their profits are down. More people on unemployment and less individual state income tax. Instead of coming out ahead, CA has set itself up to create an even worse economic situation than it is already in.

    Again, I say, stupid, stupid move.

  • So .. how has this changed from how it works now ? (Score:5, Insightful)

    by RembrandtX ( 240864 ) on Monday May 12, 2003 @04:11PM (#5938962) Homepage Journal
    Currently , federal trade laws require any 'online' store that has a brick & morter store in a state that an order is taken from [err .. so if you live in CA, and we have a store in CA, and you order off our website in Towson MD] you are charged sales tax.

    No choice in the matter.

    So basically, California's Gov isn't making a new law, he is enforcing a federal trade thang-a-mabob. He is ALSO protecting the REAL small business from closet industry. [which is good and bad i suppose.]

    Makes sence to me actually, as bad as it sounds, why SHOULDN'T an internet store have to pay sales tax? if you have a physical location where you ship goods from, and ACT like a business (and expect to rake in the $$), you should be expected to have to behave like a business.

    [And before all you 'free as in beer' folks start yelling .. I spent five years of my life running a rather successful game/hobby store in NewEngland. I know how taxes suck, but I also remember how folks used to order crap online (back when the www first started taking off.) at wholesale + 5% with no tax from jerks who simply opened up an account with WOTC or Chessex [or god forbid .. Max at the armoury.] These folks would sell out of their house, and not have to pay sales tax, or operate as a business. [or for that matter, make money.] yet I was expected to compeate with all my overhead, YET pay taxes quarterly. (Which I did, rather well infact.)]

    In the end of the day, business is business. Be it online, or offline - the laws are in place already.

    Sure, it would really suck to be selling cold-cast reproductions of klingon's out of my mom's basement and have to *gasp* actually have a merchant ID and pay taxes on sales. [keeping in mind, you don't have to pay INCOME tax unless you make profit, or make over X a year in sales.] But these are not the folks he is going after. $10 in taxes a year from the 3 models this kid sells isn't going to make a big dent in 35 million/billion/whatever.

    California is going after the folks who are using the internet as a loophole to avoid business taxes .. LEGITIMATE business taxes. One of the reasons we *HAVE* the law that you have to pay taxes in a state you have brick & morter in .. is *because* of a retail chain in california who would not 'sell' things at their cash register, but instead point the shopper to an internet terminal NEXT to the cash register and have them buy from there (and pick their product up at the end of the counter - thus avoiding sales tax, and keeping the business's bottom line better to boot.)

    Not like I begrudge the chain from TRYING:) thats what free market is all about. Use a loophole until it gets plugged :) heh.

    Blarg .. Im sure Wil Wheaton won't agree, damn bleeding heart that he is .. but I still admire the guy's guts. *grin*

  • Move your sites to Montana! (Score:5, Funny)

    by greenskyx ( 609089 ) on Monday May 12, 2003 @04:13PM (#5938987)
    We don't have any damn sales tax. If you really want to avoid it move all your company here, all six of us could use a job...

  • Damn the torpedoes! Sink that economy. (Score:3, Insightful)

    by CyberGarp ( 242942 ) <Shawn@@@Garbett...org> on Monday May 12, 2003 @04:51PM (#5939405) Homepage

    Let's see, if I'm an e-tailor with a single/store outlet in California that's doing marginally. Time to close that outlet.

    Does this tax effect someone who is just running their server in California? If so, then time to move the server and business out of California.

    Watch that sputting economy in California, go for broke.

  • Microsoft: 0 taxes in 1999 on $12.3 billion profit (Score:3, Informative)

    by Anonymous Coward on Monday May 12, 2003 @04:52PM (#5939413)
    Lets wake up. The working class is paying far more welfare to the wealthy than to the poor and this trend has been steadily rising.

    "Microsoft enjoyed more than $12 billion in total tax breaks over the past five years. In fact, Microsoft actually paid NO TAX AT ALL in 1999, despite $12.3 billion in reported U.S. profits. Microsoft's tax rate for the past two years was only 1.8 percent on $21.9 billion in pretax U.S. profits." http://www.ctj.org/html/corp0402.htm

    "Washington-based Center for the Study of Responsive Law has identified 153 federal programs that benefit wealthy corporations but cost taxpayers $167.2 billion annually [$175 billion in 2003]. For comparative purposes, federal support for food stamps, housing aid, and child nutrition costs $50 billion a year." - http://www.projectcensored.org/stories/c1995.htm

    Fact: welfare for the wealthy is FAR GREATER than welfare for the poor. BOTH democrats and republicans strongly support welfare for the wealthy. The only debate is welfare for the poor which gets all the media attention despite the amounts being far less.

    Result: the working class is paying for both the wealthy AND the poor, with the majority of benefits going to the wealthy. To me, "working class" are people who MUST work AND does work--so a doctor making $200k/year is working class to me.

    Method: keep the media focused on welfare for the poor so the working class never even hears about the welfare for the wealthy. Do this by incenting the media by offering to help repeal existing laws that limit media monopolies or go easy on anti-trust remedies.

    Why?: the wealthy take action in these matters by contributing money and contacting govt. officials while the working class whine about the poor--its easier for the middle class to look at failures of the poor instead of their own financial failure when comparing themselves to millionaires.

    Opinion: Get better informed and take action! Share info, organize petitions, write letters and contribute to campaigns. Tax laws should be simplified to close the thousands of loopholes that only benefit wealthy millionaires. And I propose a fair & just tax cut that simply raises the STANDARD EXEMPTION from around $4,700 to match the poverty line of the prior year (i.e. $9,000 for single, $15,000 for family of 3).

    Did I mention Microsoft paid no taxes on profits of $12.3 billion in 1999 and had a tax rate of less than 2% (two percent) for the past couple of years while the rest of us are paying more than TEN TIMES that rate? Yes I did, but its worth repeating.

    Well? What are you waiting for? Do something about it!

    Resources:
    http://www.commoncause.org
    http://w ww.fair.org
    http://www.projectcensored.org
    http: //www.taxpayer.net

  • Thoughts on this & US Constitional limitations (Score:3, Informative)

    by jbs0902 ( 566885 ) on Monday May 12, 2003 @05:05PM (#5939538)
    Good thing I turned in my class paper before this came out, or else I'd have had to write 3 more pages.

    A few quick thoughts on this and its relation to U.S. Constitutional law (citations, if any, at the end).
    Sorry this is long.

    The Constitution limits a state's ability to collect, or force a business to collect, sales and use taxes. In order to collect these taxes the Constitution's Due Process and Commerce Clauses must be satisfied.
    The Due Process Clause is often referred to as the personal jurisdiction requirement and focuses on whether the taxpayer has purposefully availed themselves to the taxing sovereign. Modern due process rules have utilized a fairness test, which is refereed to in International Shoe as a "minimum contacts" test. The question, in short, is "Is it fair to drag the retailer into a CA court?" The business is usually considered to have availed themselves to the taxing sovereign if they have purposefully made sales into a particular state. The due process inquiry examines accessing the quality and quantity of the seller's contacts with the state.
    Until the Quill decision in 1992, the Supreme Court had applied the Due Process and Commerce Clause requirement interchangeably. However, unlike the Due Process clause, which deals with the fairness of litigating against the taxpayer, the Commerce clause focuses on the effect the state taxation would have on interstate commerce. Therefore, the question is whether the imposition of the tax on interstate business would impede interstate commerce.
    In Quill, the Court applied a four-prong test to satisfy the Commerce Clause requirement. The test dictated that the tax must "
    [1] be applied to an activity with a substantial nexus with the taxing State,
    [2] be fairly apportioned,
    [3] not discriminate against interstate commerce, and
    [4] be fairly related to the services provided by the State."
    The Court stated that the 1st prong of the test established a "bright-line" requirement of "physical presence" to determine a "substantial nexus" and. the older "minimum contacts" view was rejected. Since Quill did not have a physical presence in the taxing state (North Dakota), it was not required to collect use taxes.
    The Quill decision essentially exempted the mail order industry from state sales and use taxes, unless the business owner was physically located within the state. This rule has carried over to the Internet sales industry.
    Two cases were the Internet retailer screwed up and got hit with CA's sales and use tax are Borders.com and Bn.com. Essentially, these two "click-through" retailers had no direct physical presence within CA. But, the two retailers had "brick-and-mortar" affiliates, Border's Bookstores, and Barnes & Nobles, Booksellers, respectively. The two legally and supposedly financially separated "click-through" and "bricks-and-mortar" companies were so closely affiliated that the CA taxing authority (and the administrative appeal Board) felt that the "click-through" company fulfilled the Quill "substantial nexus" test. These guys so intertwined their businesses that they shared marketing functions, and allowed customers to returns books purchased at "click-through" store to the "bricks-and-mortar" store.
    So, the rule, if you don't want to be forced to collect state sales/use taxes, is don't put a physical presence in the state and don't so intertwine your "click-through" business with a local "bricks-and-mortar" business that the "bricks-and-mortar's" physical presence gets imputed to you via agency.
    These two cases where done before CA passed this law. So, without reading the new CA, I'd guess it's a change in enforcement not a change in powers, which would be limited by the U.S. Constitution anyhow.

    PS:
    Every state that has a sales tax, must also have a use tax. Otherwise, the sales tax fails a Commerce clause test. However, normally, no one ever knows or cares about the use tax. And, especially after Quill, i

  • your government at work (Score:3, Insightful)

    by Scott ( 1049 ) <stl@ossuary.net> on Monday May 12, 2003 @05:55PM (#5940000) Homepage
    So very typical. Elected officials are never willing to say no to any proposed project, they wouldn't want to lose a potential vote, so everything gets approved and the bills have all kinds of unrelated riders to drive the cost up even further. How do we solve the money issue? Golly, let's tax people even more! I pay state incoming tax, federal income tax, sales tax, gas tax, license tab tax, social security, and really tax on just about everything. The only thing a local or federal government hasn't instituted is a tax on tax.

    If we're going to have a sales tax then we should have no state income taxes. If we're going to have a federal income tax there should be no additional social security charge.

    People have let the government become a crutch and in the long run this does more harm than good. It's like a crappy parent who sends their kid off with someone they don't know very well who ends up beating the shit out of their child. Sure that person will probably get what is coming to them but then the question also gets asked of the parents, "What the hell were you thinking to begin with?"

  • This will DESTROY all the .Com's share Value! (Score:3, Funny)

    by Jboy_24 ( 88864 ) on Monday May 12, 2003 @06:41PM (#5940370) Homepage
    Quick... pull all your money from eToys, cdNow, inkTomi and the like before they dive under $100/share!

  • Sales Tax on Shipping and Handling (Score:3, Funny)

    by IBitOBear ( 410965 ) on Monday May 12, 2003 @11:30PM (#5942079) Homepage Journal
    I *STILL* can not figure out how Amazon.com thinks is is approprate to charge sales tax on the Shipping And Handling portion of my purchase.

    When I contacted their web sites address for such inquiries I receive absolutely no response.

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