For only the second time in 25 years a California spending plan was passed on time. One interesting part of that balancing act is an online sales tax, something lawmakers have been reluctant to approve in the past.
It seems like a no-brainer, the state needs money, so why not tax purchases online? We pay a tax when we buy the same products in the store. But critics say this tax could actually hurt some businesses in California. Those big online retailers, like Overstock and Amazon, have found a way around this law in other states. They just sever ties with businesses they deal with in the states with the tax. So companies that sell product to Overstock could lose Overstock as a client. This has put some small companies out of business.
The California state legislature needed to close a $9.6 billion deficit and this is expected to bring in $200 million a year in revenue. Some so called brick and mortar stores support this; they think it’s unfair that their product is taxed, but the same items online are not. The big question is do the benefits outweigh the possible side effects?
So, what happens next?
California Governor Jerry Brown can either sign the legislation, veto or allow it to become law. Brown has scheduled a 12 noon PDT new conference on the California budget and maybe we will know more then.
No word from Amazon or Overstock.com, but I bet their attorneys are preparing to file the lawsuits as soon as Brown makes his decision.
One in federal court regarding the constitutionality of the nexus and the Commerce Clause. The other in California State Court regarding the imposition of a new tax without the 2/3’rds vote requirement of California Proposition 26.
Stay tuned…..and in the meantime, read this piece about yesterday’s legislative vote and what may portend for California.