Lawmakers hope to gather $150M USD in additional sales taxes from residents

As the famous Beatles song Taxman goes, "If you drive a car, I'll tax the street; if you try to sit, I'll tax your seat."

In California, amid a post recession tax-revenue stall and a host of expensive social projects including alternative energy grants and government benefits for illegal immigrants, Californian lawmakers are eying new sources of tax revenue.  Among the most tempting targets is, the world's largest online retailer.  

Seattle-based Amazon has no physical presence in California -- no warehouses, no offices, and no stores -- thus it cannot be taxed in California according to a 1992 Supreme Court decision that offered protection against taxes on interstate commerce.  The so-called "nexus" provisions mean that you can currently buy anything from diapers to a plasma TV on the e-tailer without Amazon being responsible for paying a dime of sales tax.

The key phrase is "responsible".  In this case, the responsibility of paying sales tax legally rests on citizens, 
not the business itself according to legal precedent.  However, no one seems to own up to the online purchases, so the net result is that goods are being purchased with essentially no sales tax.

That's helped the business grow tremendously, but has angered lawmakers.

Now Californian Democrats are looking to pass a new bill aimed at collecting $150M USD annually in new taxes from e-tailers.  Describes Assembly tax committee Chairman Charles Calderon (D-Montebello), "[Amazon] built an entire business model based on tax avoidance."

The bill already passed the state Senate and is expected to sail through the state Assembly as well. 

Similar laws are popping up in other states as well.  North Carolina, Rhode Island, and New York all have laws on the books that tighten collection procedures.  And Virginia, Illinois, Colorado,Texas, and Hawaii are considering similar measures.

The key to most of the laws is internet connections.  According to the new Californian legislation, Amazon 
does have a physical presence in California as it considers internet infrastructure a "presence".  So according to the state, nexus protections don't apply.

Amazon, though, whose founder once considered locating the company's headquarters on a remote island or Indian reservation to avoid taxes, is fighting the legislation in multiple states, though, declaring it illegal.  It has significant leverage, too.  It and fellow e-tailer have multiple state contracts, which they have threatened to terminate if the bill goes through.  last year California Governor Arnold Schwarzenegger vetoed a similar bill, for fear of such retaliation.

The governor's spokespeople said that the bill would be a "tough sell" for the governor to support after vetoing the similar bill last year.  Still some Democrats are hopeful that the bill will pass.  States Senate Budget Committee Chairwoman Denise Moreno Ducheny (D-San Diego), "California is big enough that we should not submit to that kind of blackmail."

She and other state Democrats state that if Gov. Schwarzenegger doesn't pass a bill, his successor when his term limit expires in a year likely will.

"Let's face it, we're not changing the world. We're building a product that helps people buy more crap - and watch porn." -- Seagate CEO Bill Watkins

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