retail news in context, analysis with attitude

The Los Angeles Times reports that beginning tomorrow, because of the new state budget signed into law by Gov. Jerry Brown yesterday, “ Inc. and other large out-of-state retailers will be required to collect sales taxes on purchases that their California customers make on the Internet,” a change that is expected to generate $317 million a year in revenue for the financially troubled state.

The Times goes on:

“California is the seventh and largest state in the country to pass a law to collect taxes on out-of-state Internet sales. Illinois, Arkansas and Connecticut acted earlier this year, North Carolina and Rhode Island in 2009 and New York in 2008. Amazon sued to overturn the New York law and lost in the lower courts. The company is paying sales taxes into an escrow account pending an appeal.

“Other states currently are considering similar sales tax collection bills.

“California's new law was drafted to circumvent a 1992 U.S. Supreme Court ruling that sellers can't be forced to collect sales taxes if they have no physical presence in the state where buyers live.

“The new statute would establish that presence in two ways: when sellers pay commissions to other Internet sites in California, known as affiliates, that refer buyers; and when sellers have a related company operating in the state.

“Amazon has thousands of such affiliates in California. It also has related business operations that include Lab126 Inc. in Cupertino, which develops Kindle electronic book readers, and a Studio City office for its Internet Movie Database unit.”

The San Jose Mercury News reports that both Amazon and reacted quickly to the new tax law and “announced they are severing their relationships with California affiliates to avoid having to collect the tax ... The State Board of Equalization estimates there are 25,000 affiliates in California, 10,000 of whom make money by being affiliates with Amazon.”
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