Internet-Tax Bill in Limbo

The fate of California’s controversial proposed Internet-tax laws hangs in a precarious balance.

On June 15, the California Senate passed a package of trailer bills to the state budget that would authorize the state tax board to enforce collection of sales taxes from out-of-state e-commerce retailers. The vote passing the trailer bills was 24–15.

A leading bill, SB234, authorizing the collection of sales taxes from out-of-state e-commerce retailers, was sponsored by Sen. Loni Hancock (D–Berkeley). There were two Assembly bills proposing what has often been referred to as the Amazon tax because prominent e-commerce retailer has vigorously lobbied against similar bills in other states. The Hancock bill and its sister Assembly bills were set to be delivered to the desk of Gov. Jerry Brown, but they quickly slipped into a state of limbo.

Brown vetoed the state budget on #8232;June 16. He has not decided on the fate of the Internet-tax bills. A representative from Hancock’s office said Brown may decide on the bill by June 27. At a June 16 press conference, Brown said he would not veto all the trailer bills attached to the budget. During the conference, he called the Hancock bill “a common-sense idea.”

The state of California loses $1.1 billion each year in uncollected e-commerce sales taxes from e-commerce, according to a 2011 study from the State Board of Equalization, which collects taxes for the state of California.

More than 20 states have considered taxing out-of-state e-commerce businesses. On May 31, Texas Gov. Rick Perry vetoed a bill to collect online sales taxes in his state. Connecticut, Illinois, New York, North Carolina and Rhode Island passed laws to tax online retailers. Retailers and reacted by cutting business ties with their affiliates in states considering the law, including Hawaii and Colorado.

Amazon wants a clear playing field. “Our position hasn’t changed in that we believe that a national solution that is truly simple and evenhandedly applied is the right and effective approach,” said Paul Misener, vice president of Amazon’s global public policy.

Any bill to tax e-commerce would help physical retailers, said Alan Hall, who owns three boutiques with the nameplates Eden and Muse. “Big online retailers have an unfair advantage,” he said.—Andrew Asch