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 Amazon.com, 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 Overstock.com 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.
"A politician stumbles over himself... Then they pick it out. They edit it. He runs the clip, and then he makes a funny face, and the whole audience has a Pavlovian response." -- Joe Scarborough on John Stewart over Jim Cramer
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