Calif. Bill Seeks Online Sales Tax

Friday, September 1st 2000, 12:00 am
By: News On 6

SACRAMENTO, Calif. (AP) — California lawmakers have voted to force companies with stores in California to collect sales tax on products they sell over the Internet, a tiny step toward dealing with the increasing number of online purchases.

The bill, passed Wednesday, is believed to be the first of its kind in the nation.

Gov. Gray Davis hasn't said whether he will sign the bill, but he generally doesn't support Internet taxes, said his spokeswoman Hilary McLean.

California's sales tax is 7.25 percent. If that tax was applied to Internet sales, the state estimated it could bring an additional $14 million annually, a fraction of the state's $22 billion in sales taxes.

The Senate also sent Davis a related bill on Wednesday that would require him to talk to other states about developing a multistate sales tax system to capture revenue from Internet sales to California residents by out-of-state companies.

California has approved a moratorium on taxing such purchases while Congress and other states consider the complicated issues involved. At least 26 other states have formally approved — either through legislative resolutions, proclamations or gubernatorial orders — plans to study a multistate tax system, according to the National Conference of State Legislatures.

In Washington, federal lawmakers are considering a five-year extension of a ban on Internet-specific taxes that expires next year. The bill, which has cleared the House, includes taxes on access but does not address state sales taxes.

Under the California bill, an Internet or catalog company would have to collect sales tax if it has a relationship with stores in California, sells similar products under a similar name or if the two companies promote each other's sales.

That would include companies like Barnes & Noble bookstore and online partner, which is incorporated separately.

``The public believes Barnes & Noble is barnesandnoble is Barnes & Noble, whether they see it on the corner or on the Internet,'' Assemblywoman Dion Aroner said.

She said many companies, such as Macy's and Recreational Equipment Inc., that do business both in stores and online are collecting the tax.

A Silicon Valley lawmaker, Assemblyman Jim Cunneen, called the bill ``a major mistake.'' California should wait for federal and multistate negotiations on the e-commerce tax issue to settle the issue, he said.

The bill was sought by Northern California Independent Bookstores and is supported by stores, labor groups and local governments. It is opposed by the American Electronics Association and the Silicon Valley Software Coalition.

``We think California should try to be a home for e-commerce and try to be on the cutting edge, and we think this would put California at a competitive disadvantage,'' said Chris Shultz of the American Electronics Association.

Neil Austin of the National Conference of State Legislatures expects other states will follow California's lead. ``I think the states have been waiting for someone to start,'' he said.


The sales tax bill is AB 2412.

On the Net:


Advisory Commission on Electronic Commerce:

E-Commerce Tax News: