Paul L. Caron
Dean


Saturday, February 20, 2010

California Senate Passes Amazon Tax

Amazon L.A. Times, Lawmakers Want to Tax Amazon Sales in California, by Evan Halper:

The retail giant is among several that have no physical presence in the state. Legislative Democrats think a levy on them could bring in up to $150 million annually.

State lawmakers hunting for revenue are eyeing one source that could prove costly to millions of California consumers: Amazon .com.

The online retail giant has enjoyed an edge over many competitors in the state because it is not required to collect sales tax from residents who buy books, top-of-the-line plasma televisions, cases of diapers and thousands of other products from its website. The Seattle corporation has no store, warehouse, office building or other physical presence in California, and the state cannot tax such businesses under a 1992 Supreme Court decision.

Consumers here are required to pay sales tax on the goods they purchase at Amazon but almost never do, because the state has no mechanism for tracking Amazon purchases and collecting the money.

Now California is one of several cash-strapped states exploring a novel legal strategy that could force Amazon and others like it, including Overstock.com, to start collecting tax from their customers. New York launched the effort with a law that took effect in 2008. North Carolina and Rhode Island have passed similar laws; other proposals have advanced in the statehouses of Virginia, Illinois, Colorado and Hawaii.

The Democrats who control California's Legislature plan to put their own bid on the governor's desk this month in hopes of reaping up to $150 million annually for state and local coffers. The revenue would make only a tiny dent in the state's $20-billion deficit, but supporters say every dollar counts in tight times, and there's a principle at stake.

Amazon has "built an entire business model based on tax avoidance," said Assembly tax committee Chairman Charles Calderon (D-Montebello).

(Hat Tip: Mox Elraheb.)

https://taxprof.typepad.com/taxprof_blog/2010/02/calkifornia-passes.html

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Comments

Amazon has "built an entire business model based on tax avoidance," said Assembly tax committee Chairman Charles Calderon (D-Montebello)....


With brain surgeons like this it's no wonder the state is bankrupt.

Amazon's business model is and has always been selling product to people.

Posted by: DAmien | Feb 21, 2010 7:21:52 AM

google

it wasn't Muslims

Posted by: sure | Feb 21, 2010 9:31:25 AM

....and the US government (Mafia) has built its entire business on theft and deception. It's over boys, no one is buying your BS any more.

Posted by: Mike | Feb 21, 2010 9:32:10 AM

Most of the stuff I buy are toys and electronic goods. If Amazon starts taxing me, I'm gonna cancel my Amazon Prime membership. No point in buying online if tax brings the price up to the same as retailers anyway. I should be cutting back on consumption anyway. Better to send my money to my relatives overseas. They don't get taxed, because they live under communist government, which has a lower tax rate than capitalist government.

Posted by: Bao | Feb 21, 2010 9:32:39 AM

I'm thinking PO boxes in surrounding states are going
to get real popular.

Posted by: Fred | Feb 21, 2010 10:19:53 AM

Taxing California's uber rich, such as the governator and his cronies at the fair level of 90%, is a much more profitable option.

Posted by: Cathy | Feb 21, 2010 10:27:08 AM

The proper response from Amazon, especially if they do not have a brick and mortar presence in the state, is to tell California to Pound sand and ignore them.

Posted by: JIMV | Feb 21, 2010 10:33:25 AM

It would be fun to watch what would happen if Amazon simply pulled the plug on California. If you live in California, you can not purchase anything from Amazon. A firm stand on one state might stem the growth of this nonsense.

Or, how about a California "handling fee"? Say the state tax rate times 2? Just to cover the additional expenses.

Posted by: W. Keller | Feb 21, 2010 10:38:51 AM

How can this work?

"No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing it's inspection Laws: and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Controul of the Congress."

Posted by: Rob | Feb 21, 2010 10:40:20 AM

supporters say every dollar counts in tight times, and there's a principle at stake.

Heh. What principle would that be? That every dollar spent in the state of California must first pass over the sticky hands of Sacramento first?

It's amazing how there is "principle at stake" when it comes to confiscating more money, but no principles at stake when it comes to enslaving taxpayers at the behest of gluttonous gov't. And we haven't even seen the public pension mess yet...

Posted by: Chris | Feb 21, 2010 10:40:53 AM

I agree, shut amazon down in california and allow a lot of small markets to open up and create what the layman calls capitalism. Excellent idea JimV. I'm glad you support the free market.

Posted by: guy | Feb 21, 2010 10:47:23 AM

Ban public sector unions, which used to be - and should be - illegal.

Problem solved.

Posted by: Jay Guevara | Feb 21, 2010 10:56:26 AM

As long as the idiots like Calderon continue to throw the money they DO collect from us Californians into running the California Air Resources Board (an example of their flavor of bureaucracy can be found at: http://www.arb.ca.gov/enf/advs/advs397.pdf) and funding AB32-related 'climate change' silliness, I will feel no guilt whatsoever about starving the beast.

Posted by: JEM | Feb 21, 2010 10:56:29 AM

Read Atlas Shrugged? I'm living it!

Posted by: Joe G. | Feb 21, 2010 10:56:45 AM

Does California have the authority to force an out of state business to collect sales tax for them? What will California do when Amazon tells them to take a hike? Arrest Jeff Bezos when he enters California? Or confiscate all Amazon packages?

Posted by: ic | Feb 21, 2010 10:58:37 AM

28 years of Republican tax cuts that benefited only the rich has shifted the income in this country from the 80 percent of poor and middle class to the richest 20 percent, according to CBO figures for 1980 to 2008. The squeeze on the middle class by increasing state taxes and fees, mostly fees, has been the main driving force that brought on the Great Recession. Further taxing the middle class will not help, nor will doing what the Republicans say they want, further tax cuts for the rich!

When are we going to wake up?

Posted by: Ian MacFarlane | Feb 21, 2010 11:04:11 AM

Well, since the Corporations are the only ones who can possibly force our Government to spend responsibly (the media is too full of itself and other circuses), perhaps these Corporate "people" should made a stand. It's completely wrong that our government "servant's" never have to suffer consequences for their foolishness.

Posted by: Mr Fife | Feb 21, 2010 11:11:59 AM

Hey Keller, if Amazon avoided a state, or even if it dropped off the face of the earth, at most people would be inconvenienced. There's way too much competition out there now for online sales. And a good chunk of that competition is from California.

The only folks who would suffer are Amazon's biggest allies - those who supply their goods to Amazon, & those who have their own pages that take %s of the top of their own sales. I suppose one could argue that overall prices could rise across the board in CA, since there would be one less major competitor. But Amazon has little leverage if they threaten boycott.

I bet some of California's online players are hoping for Amazon to boycott. Hello, Ebay, Google, etc. (California business influencing this decision, anyone?)

Posted by: Rip | Feb 21, 2010 11:12:26 AM

You mean the CA leftists who just LOVE taxes for everyone else, don't voluntarily pay the sales tax?

Posted by: mikec | Feb 21, 2010 11:24:05 AM

If the Supreme Court said they couldn't do this way back in 1992, why is California risking legal action against them by Amazon?

Posted by: CraxyD | Feb 21, 2010 11:28:15 AM

The idea is not without precedent:

http://practical-tech.com/business/amazon-pulls-plug-on-nc-amazon-associates-over-taxes/

Posted by: Elephantina | Feb 21, 2010 11:42:02 AM

Fred: "Taxing California's uber rich, such as the governator and his cronies at the fair level of 90%, is a much more profitable option."

Only an idiot would say this. The "uber rich", for one thing, don't collectively have that much money, compared with the middle class anyway. And even if they did, there's a separate issue: if California raises their taxes they simply move to another state. We currently have business conferences here in California where neighboring and nearby states (Arizona, Oregon, Colorado, Nevada) openly run advertising contrasting their business-friendly governments with California's tax-you-into-poverty-cause-then-you'll-be-on-welfare-and-a-guaranteed-Democrat-for-life attitude, and in some cases it's worked. California in response blusters about how much better the weather is here, and then raises taxes again, or harasses businesses in some other way. They refuse to pay any attention to the fact that the business community is fleeing to other states, confidently saying that they can simply raise taxes on the remaining taxpayers, and make up the shortfall.

If we keep this up, the state will be a wasteland, and the real estate will be so expensive no one can afford it. A serious real estate collapse could have lots of consequences elsewhere. What happens then?

Posted by: DavidN | Feb 21, 2010 11:43:09 AM

Somewhere, Steve Jobs is just smiling. Good bye Kindle, Hello iPad.

I'm a PC, and I am glad I don't live in California.

Posted by: Jeff | Feb 21, 2010 12:06:46 PM

ic: Where do you get your CBO information? I want to see published data, not "everyone knows this". Over 90% of income taxes are paid by the top 50% of income earners. Note that this is income earners, not people. These are IRS figures. I got my information from the IRS databook posted on their web site. How is this placing most of the tax burden on the poor an middle class?

Posted by: DAK | Feb 21, 2010 12:18:03 PM

I'm wondering whether they have attended to the serious business of repealing the law of gravity? Gravity is the main barrier to space exploration, and the primary reason that the aerospace industry has relocated to other states with less gravity. I understand that there are objections by those who maintain that gravity is an essential element in their businesses, but that can be easily dealt with by a statewide system of gravity permits, which will raise revenues while fairly allocating this precious resource, taking into account, of course, the needs of minorities for extra gravity to compensate for the past hoarding of gravity by weight interests.

Posted by: punditius | Feb 21, 2010 12:21:31 PM

"28 years of Republican tax cuts that benefited only the rich..."

When is the last time a poor person gave you a job?

Posted by: Enzo | Feb 21, 2010 12:22:19 PM

One of the biggest on-line businesses in California is Commission Junction, located in Santa Barbara. They manage the relationships between thousands of on-line retailers and their affiliates, and this law, would probably drive them and their 400 employees out of California.

http://www.affiliatemarketingplan.com/networks/cj-affiliate-network-overview


Posted by: DelD | Feb 21, 2010 12:32:59 PM

Stupid b***ards! And as long as Obama and these corrupt Democrats are in office, everyone else will be paying for the self-destruction of the California economy by the Democrats in California and their illegal alien programs.

Posted by: CrypticGuise | Feb 21, 2010 12:46:49 PM

Someone should explain to the California State 'Legislature' that they have no authority over inter-State commerce. The problem with California has nothing to do with Amazon, and everything to do with term-limits: by the time a legislator has finally got a good grip on things, they are booted out - the lobbyists run the State. The legislatwhores sell themselves to the lobbyists (why not, there is no career for them in political office), and the people of California suffer.

A better solution to California's problems would involve a decent sized asteroid hitting Sacramento when the politicians are all there.

Posted by: AC | Feb 21, 2010 12:57:25 PM

Brilliant! Now the state can lose millions fighting the inevitable lawsuit from Amazon. How can Calif. single out one on-line retailer and expect to win? Proof once again of what's increasingly suspected by Americans: Liberals have lost all ability to function in the real world.

Posted by: Floyd DaBarber | Feb 21, 2010 1:23:16 PM

pff, the state of california Screws it's citizens, so it's impossible to get any deals anywhere, they misspend they're funds and complain and squeeze it's citizens for more money. Affordable housing? none, Health care reform? none, We pay more in gas tax than anyone in the country, we also pay more for products than anyone in the country as well, if we are one of the largest seaports and we take in products form other countries first, ya think the prices would be lower no? pfft. I get my electronics from New york/new jersey where they don't charge tax to californians, if the govt of california can't manage their money, screw them, the unions want to be greedy and not give up anything so the citizen's have to suffer.

Posted by: Bob | Feb 21, 2010 1:30:48 PM

How about a 80% income tax on legislative salaries? Unfair? Who cares. We can do it because we want to. Petition anyone?

Posted by: Mandingo Bacigalupi | Feb 21, 2010 1:57:01 PM

I don't much like this either, living in CA... but what no one here seems to understand is that we're *already* required to pay tax on any Amazon purchases. Pretty much no one does, which is illegal, but as the article states, CA has no way to track that at the moment so everyone gets away with it.

Go read about sales tax and use tax in CA, this wouldn't be 'adding' any new taxes, it would just be enforcing existing ones. There is no issue with legality here in terms of this proposal - the tax already exists (and is legal), and we are already required to pay it.

All this complaining about legality or suggestions that Amazon should penalize CA in some way would have no effect on this proposal. CA should have just added its own tracking to online purchases (from all vendors, not just amazon) and slammed just about everyone in the state with tax penalties. Get even more money that way :P

Posted by: sigh | Feb 21, 2010 2:04:36 PM

The tax burden should be shifted, but some of it on to the middle class and poor. If I am paying taxes, then I can legitimately say "Hey that's a waste of tax dollars, knock that off." But if I am only collecting government aid, why should begrudge other people from collecting from the government? In short, I am a co-conspirator of robbing the public purse, who has been bought off. Successful businesses make people rich, and they give jobs. (Of course I want ethical businesses, without government favoritism. And I believe those could exist.)

Posted by: Miilwaukee | Feb 21, 2010 2:18:46 PM

"built an entire business model based on tax avoidance,"

OF COURSE they have, it's called "playing by the rules", numb-nuts. EVERY business tries to legally avoid taxes. Its called "being in business". Should they make efforts to INCUR tax liability, and therefore RAISE the prices we pay?

Look Mr. Chairman Charles Calderon (D-ouchebag), Amazon is providing us with goods and services, and they have followed the rules. You, on the other hand, produce NOTHING. You're a parasite on this economy, leaching and frittering our tax dollars. YOU HAVE PLENTY OF OUR MONEY. Instead of seeking creative new ways to collect more, how about SPENDING LESS. Ass****.

Posted by: Upton O Good | Feb 21, 2010 2:33:31 PM

Just because the state has no legal authority to do this doesn't mean they won't. Look at the unconstitutional crap the Federal gov't gets away with. In case no one has noticed, laws only apply to the people but not the government.

Posted by: j r | Feb 21, 2010 3:29:33 PM

This is why we need a third party system. Republicans fight for the rich. Democrats look out for the poor and those not wanting to work. Many on both sides are in the pocket of big business (many of which are global w/o hard ties to our country's interest). Both parties seemed to be giving the finger to the middle class. I personally would like a party that was representing our rights as well. And not just the right to fork over more money to support your agenda.

Posted by: SA | Feb 21, 2010 4:04:23 PM

Why doesn't Amazon simply refuse to collect and send in the tax and let California sue them. I don't believe a state that is broke can afford a lawsuit they would loose anyway. If I were Amazon, I would tell California to stick it up their wazoo. And that goes for the other states who are collecting a sales tax on the sales made by Amazon.

Posted by: plumbbob | Feb 21, 2010 4:23:06 PM

Why don't they try denying tax payer funded social services to the border jumping scum that's ruining this state and then look for petty crap like this that only hurts the tax payers.

Posted by: skitzo | Feb 21, 2010 4:41:24 PM

heh, a lot of anti-California comments. You do realize Cali is a huge state and the "Elites" are not only a very small percentage of the population, but they don't buy off of amazon anways.

People will simply stop buying, which would be counterproductive of what they're trying to do.

Posted by: mike | Feb 21, 2010 5:11:08 PM

Hey, why dont we just tax weed instead?

Posted by: Kyron | Feb 21, 2010 8:03:40 PM

Who is John Galt?

Please, California Democrats, stop wringing your hands while looking for untapped revenue and cut your unashamed and ridiculous spending. Raising taxes will only encourage more taxpayers to flee the state.

Posted by: P McKann | Feb 21, 2010 8:23:01 PM

And furthermore, Mr. Chairman Charles Calderon, you and the CA legislature have BUILT AN ENTIRE BUSINESS MODEL BASED ON TAX COLLECTION. And you sit there and scold us private citizens for trying to legally avoid your excessive taxation. PTUHH I spit on your business model. Who the hell elects these turds?

Posted by: Upton O Good | Feb 21, 2010 9:31:12 PM

Come On 2012! A Hardcore solar storm would do us some good about now..

Posted by: 2012 | Feb 22, 2010 3:25:48 AM

If I were a betting man, which I'm not, I would bet that the Supreme Court will overturn the 1992 decision. After all, the courts allow long arm statutes to reach people and companies (for purposes of civil suits) who do business over the internet. There are lots of these cases, starting, I think, with Zippo v Zippo. The invention and development of the internet and e-commerce are sufficient to overcome stare decisis.

Posted by: eli bortman | Feb 22, 2010 5:10:46 AM

The government of California has spent itself into a mountain of debt and now suggests the best way to solve this problem is by taxing businesses. How about living within your means instead?

Posted by: Chuck | Feb 22, 2010 8:30:38 AM

My dream is to pass a law which taxes elected officials at a rate 50% higher than the general public with no deductions or write-offs at all. That might give them some incentive to cut it for the rest of us. Be a nice referendum for Californians to consider...

Posted by: JD | Feb 22, 2010 9:23:12 AM

That's what the initiative process is for. So California citizens can fix the mistakes that Sacramento has made.

Posted by: Casey | Feb 23, 2010 3:39:36 PM

If Amazon stops sellers in CA from selling because of the taxes. Hundreds of independant small sellers that use Amazon as a place to sell their goods it will put people out of work. And thats just what we dont need more taxes and less jobs. I dont understand that we elect these seamingly smart people to office and when they get in office they turn in to morons.

Posted by: Mike | Mar 18, 2010 10:57:07 PM

I think many people are misunderstanding the "NEXUS" Law being proposed
The California proposal seizes on the thousands of online sales affiliates that Amazon contracts with to get customers to its site. Those companies advertise Amazon products, provide links to the company's website and get a percentage of the resulting sales.

Many of the affiliates are in California. Supporters of the Democrats' bill, ABX8 8, say that the connections amount to a presence for Amazon and that California should be able to force the firm to collect sales tax.

This is a stretch beyond my comprehension. And it won't bring in one dime of revenue! It only takes a few hours to move a web site to a business friendly state. Internet users don't care where a site is hosted! Their website experience will be exactly the same.

This bill will result in a net loss to California as it drives business that host websites out of the state.

Posted by: Bob D | Mar 19, 2010 12:03:53 AM