California Legislature and State Board of Equalization Harass California Small Business With Mary Kay Tax

Posted 2 CommentsPosted in Amazon Tax, California State Board of Equalization, Mary Kay Tax

The California Legislature and Democrat Governor Jerry Brown REALLY think they will be able to capture additional state revenue with the Amazon tax?

Their track record with the California “Mary Kay Tax” is not so good, as exposed in this piece over at Cal Watchdog.

Call it the Mary Kay Tax. It hits small businesses —  such as Mary Kay and Avon distributors — with heavy administrative costs, while bringing a pittance to the state treasury.

It’s a tax program the Legislature passed in 2009 to help balance the budget. Then it was signed into law by then-Gov. Arnold Schwarzenegger. But it has been a colossal failure as well as absurdly expensive. Despite the failure and added expense, the program is not getting the ax.

AB X4-18 created the Board of Equalization’s Qualified Purchaser Program
to collect use taxes from the smallest business owners who were not usually registered for sales and use-tax purposes.

But the taxes collected in the ensuing two years are 80 percent below projections. Adding insult to injury, the program is costing taxpayers an additional $10 million a year to administer, while adding 137 state employees.

I remember that this tax when it was passed created quite a bit of buzz in the dental community since all dental offices were required to file additional forms and paper work. As if dentists did not have enough compliance to navigate in California.

But, like everything the Democrat dominated California Legislature seems to touch there are many unintended consequences, including compliance costing almost as much as the tax revenue gain. How smart?

Despite the dismal collection numbers and the expansion of a state agency during the worst economic crisis in state history, the program is not being shelved. Because the tax was passed by the Legislature, only the Legislature can repeal it. But all is not lost. The BOE can make changes to the program.

The 2009 law requires business owners who receive only $100,000 in gross annual receipts to register with the State Board of Equalization to remit a “use tax.” But the $100,000 threshold is not the amount of income going into the business owner’s pocket. That $100,000 is the total amount of money earned by the business. Owners say that most of that money goes right back into the business to pay expenses, employees and vendors.

The motive for the tax was typical of the California Legislature. It was created to help balance the state’s budget. In these inflationary days in this expensive state, a $100,000-a-year business could be just one or two people.

The program has registered 500,000 California small business owners, targeting sole practitioners such as doctors and dentists, tax preparers and CPA’s, as well as contractors, lawyers, real estate agents and even Avon and Mary Kay cosmetics representatives.

Most of the BOE registrations have been “involuntary.” According to BOE Board Member George Runner, a former Republican state senator, this means that if BOE employees determine that an individual meets the definition of a “qualified purchaser,” the business owner is automatically registered to pay the tax.

Runner held a press conference Monday at the offices of the National Federation of Independent Business. He said that, because so few qualified purchasers have filed use tax returns with the BOE, the agency staff decided to send out 305,000 “delinquent” notices. The notices identified the small business owners as “tax delinquents,” and threatening them with “estimated use tax determinations.” According to Runner, this was done by BOE staff, without the knowledge of BOE board members.

Board members found out about the delinquent-notice mailings when more than 175,000 angry small business owners immediately flooded the agency with phone calls. The BOE legal department was consulted and quickly determined that there was no way to estimate use taxes. According to Runner, this was ample proof that the program should be drastically modified.

Runner said that most people are understandably confused about the use tax. Many area small business owners have had to hire CPAs just to navigate through the new tax process. Most small businesses do not have accounting departments. Even those with accounting departments say that accounting staff is spending far too much time on the cumbersome and confusing tax reporting.

I love it. The Sacramento Board of Equalization staffers on their own decided to call 305,000 business owners tax delinquents. Yeah, that will really help compliance. People will simply go even more underground and avoid paying any taxes.

Or, better yet, leave California for Nevada and Colorado.

Then, there is the cost of compliance to the small businesses that do remain in California. Costs that will be passed along to consumers.

“The average qualified purchaser pays almost as much to their accountant to comply with this program as they pay in use tax, resulting in much more of a burden upon businesses than benefit to the state,” Runner said. “It costs taxpayers an average of $75 for their accountant to prepare the BOE return, even though many owe far less than this amount.”

Expected to generate $264 million in the two years since the law was passed, instead the program has collected only $56 million in taxes. But it has cost a total of $23 million in additional BOE administrative costs. Add in businesses’ tax-preparation costs, which are tax-deductible, and the state well could be losing more in revenue than it gains from this program.

NFIB Executive Director John Kabateck said that his organization represents 20,000 small California businesses and 350,000 across the country. As anti-business laws continue to be imposed on California’s businesses by government bureaucracies, the game of “gotcha” government policies are fast becoming “we’re going to get you,” Kabateck said.

“Small businesses have been closing at a clip,” said Kabateck. “And there are now 2.2 million Californians unemployed.”

Kabateck said that the average small business owner spends countless hours doing paperwork costing at least $48.72 per hour, $400.00 per day and $2,000.00 per week, thanks to taxing agencies like the BOE.

And, the POLS wonder why many businesses, especially small ones, have closed up shop and moved to other states. California Legislators ponder why there are more than two million unemployed Californians.

Me thinks they should look at themselves.

California State Board of Equalization Votes to Begin Rule Making to Implement the Amazon Internet Sales Tax

Posted 1 CommentPosted in Amazon Tax, Internet Sales Taxes

Why the Board is proceeding and wasting taxpayers money on a law that will face a referendum is pure Democratic politics.

But, oh well.

Debate over the 90-day interim period during which Amazon gathers signatures for the voter referendum to repeal the law was a hot issue today between board members. Because the office of legislative counsel issued a recent opinion which said the law would be suspended the minute Amazon qualifies the issue for the ballot, Republican board members George Runner and Michelle Steele
said the BOE should not implement the tax yet.

At issue was whether the new law would or should even take effect.

However, board members Betty Yee and Jerome Horton, Democrats, insisted that because ABx1 28 was already signed into law, it needs to be upheld by the board unless and until it is repealed either by the voters, or in a court of law.

Yee wanted to abandon discussion of the interim period, and instead pushed ahead for implementation of the tax, beginning with an “interested parties” process discussing the need for rule making to implement and clarify the provisions of the bill.

The Board voted 3-2, siding with Yee and Horton to have obtain an opinion from the Attorney General explaining how the referendum process will affect the tax, and to begin the meetings to discuss implementation.

This move is just the beginning of a long litigious process.

Signature gathering is on-going and it is just a matter of time before the referendum folks and the California Attorney General are sued to try to remove the referendum from the ballot –  before and then after it qualifies.

The campaign consultants, communications strategists and the lawyers are all going to get rich while I no longer earn a few bucks from selling Amazon books and media on flapsblog.com.

Wonderful…..

California State Board of Equalization to Discuss Implementation of the Amazon Internet Sales Tax

Posted 1 CommentPosted in Amazon Tax, California State Board of Equalization, Internet Sales Taxes


Today the California State Board of Equalization will meet at 10 AM.
The state Board of Equalization will start to tackle how to implement a new law requiring major online retailers to collect sales tax on purchases made by Californians at its Sacramento meeting today.

But any solution for applying the so-called “Amazon Tax,” which was approved last month as part of the budget package backed by Democratic lawmakers, could be short lived. Opponents of the change have filed referendum papers to ask voters to overturn ABX1 28 in the next statewide election, a move that could pull the plug on the plan to generate revenue much sooner than 2012.

A Legislative Counsel opinion sought by Sen. Joel Anderson, R-Alpine, concluded that the law would be suspended once the challenge qualifies for the ballot, even though the majority-vote measure took effect immediately as a result of Proposition 25. That scenario would put the Amazon Tax on hold until the next statewide election, which will likely be held in June 2012.

The meeting will be webcast this morning here and the full agenda in Pdf format is here.

In the meantime, the signature gatherers are proceeding and the television ad mavens are busy.

California Amazon Internet Sales Taxes Will Be Suspended When Referendum Qualifies for Ballot?

Posted Posted in Amazon Tax, Internet Sales Taxes


Looks like it, as per a new legal opinion from the Office of the Legislative Counsel.

Legislative lawyers believe that if a referendum on the new law requiring sales tax collection by online retailers qualifies for the ballot, the law will have to be put on hold until the voters have their say.If that opinion holds, it may raise the stakes for a budget written with an expectation of at least $200 million from the law in question.

“We are of the opinion that the operation of the statute would be suspended during that time period,” writes attorneys for the office of
the Legislative Counsel in a letter dated Friday to state Sen. Joel Anderson (R-San Diego).

Anderson apparently asked for a legal opinion on whether the law, contained in ABx 28, would be operable should the newly launched campaign to overturn it via referendum gather enough voter signatures.

The six page letter (PDF) tackles an issue raised a few times before, and several times since, voters approved Proposition 25 in November: whether a majority vote budget and its related “trailer” bills are subject to referendum.

But, I am positive that this will be litigated once the requisite signatures are gathered.

Which I do not surmise will be too long with Amazon.Com’s deep financial pockets. With the polling already showing a likelihood that the referendum will pass, Walmart, Target and the other brick and mortar retailers will want to keep Amazon’s feet to the fire – and in legal fees.

Some have suggested that the budget and any related bill which includes an “appropriation” could, under Prop 25, may be immune from the referendum. In part, the quandary is linked to the California Constitution’s exclusion of “urgency statutes” (which go into effect immediately and require a supermajority legislative vote) and those “providing for appropriations.” Until Prop 25 lowered the budget vote in the Legislature, both seemed to apply to state’s annual fiscal plan.

“Before Proposition 25,” the opinion letter states, “the referendum was applicable only to statutes that did not go into effect immediately.”

But now, write legislative attorneys, the budget can no longer be considered exempt from referendum because Prop 25 didn’t explicitly say so. And while the constitution doesn’t expressly put a statute on hold once a referendum has qualified for the ballot, Legislative Counsel says the courts have nonetheless operated on that assumption.

Poll Watch: California Voters Split on Internet Sales Taxes ( Amazon Tax) Referendum

Posted 2 CommentsPosted in Amazon Tax, Internet Sales Taxes
For the second year in a row, USC Dana and David Dornsife College of Letters, Arts and Sciences is partnering with the Los Angeles Times for a public opinion poll about the state of California. Dan Schnur, director of the Jesse M. Unruh Institute of Politics, and Evan Halper, Sacramento Bureau Chief from the Los Angeles Times, discuss the amazon.com tax.

According to the latest USC Dornsife/Los Angeles Times Poll.

California voters are split about new legislation that would require Internet retailers to begin collecting sales tax on online purchases, according to the USC Dornsife College of Letters, Arts and Sciences/Los Angeles Times Poll. This week, opponents of the so-called “Amazon tax” were given approval by Secretary of State Debra Bowen to begin collecting signatures for a ballot referendum to overturn the measure.

Conducted July 6-17, 2011, the latest USC Dornsife/Los Angeles Times Poll shows 46 percent of voters favoring the online sales tax as a revenue source to help balance the budget and pay for state services. Forty-nine percent opposed the measure, which would raise taxes and could hurt local businesses who sell products through online retailers such as Amazon.com.

This will be a costly media campaign and remember once the half million or so signatures are collected, the internet sales taxes are suspended until after the election. Also, the way the referendum is worded, voting NO means NO Tax – a clear advantage to the referendum proponents.

Now, whether Walmart and Target will team up with Big Labor and the Democrats to fight the referendum will be an interesting development. The early polling may scare them away from such a massive ad driven campaign though.

Stay tuned….

Non-white voters are slightly more likely than White voters to oppose the tax. Among White voters, 47 percent favor the tax and 49 percent oppose it. Among non-white voters, 43 percent favor the tax and 52 percent oppose it, including 57 percent of Black voters and 52 percent of Latino voters.

Younger voters are also more likely than older voters to oppose the tax. Fifty-nine percent of young men oppose the tax, as do a majority – 52 percent – of young women. (37 percent of young men and 45 percent of young women support the tax.)

Overall, 55 percent of young voters opposed taxing online purchases by California residentsand 41 percent support it. In contrast, 43 percent of voters over the age of 50 oppose taxing online purchases, and 52 percent support it.

Opposition to the sales tax correlated to online shopping habits. Among voters who do most of their shopping online, 61 percent oppose taxing online purchases and 39 percent support it.

But a significant majority of California voters — 82 percent — currently do little or no shopping online. Among voters who never shop online, 48 percent support charging sales tax for online purchases, and 45 percent oppose it.

Flap’s California Morning Collection: July 25, 2011

Posted 1 CommentPosted in Amazon Tax, California, California Citizens Redistricting Commission

A morning collection of links and comments about my home, California.

However we vote, Amazon loses

A Times-USC poll last week showed a close contest. After registered voters were read some arguments on both sides, the so-called Amazon tax was supported by 46% and opposed by 49%.

Looking inside the numbers, two factors stood out, neither shocking.

A majority of Democrats (52%) favored collecting the tax online; the majority of Republicans (59%) opposed it. Independents were almost evenly split.

There was a generational divide: The younger the voters, the more opposed they were to online tax collections. The older, the more supportive. Specifically, 55% of people under 50 were opposed, 52% of the over-50 crowd supported it.

The conflicting political dynamic is this: The best bet is there’ll be a low turnout for the election. A low turnout normally benefits Republicans. Score one for Amazon. But younger people usually don’t bother to show up; older voters do. Score that for Wal-Mart.

Regardless of the outcome on election day, Amazon looks like a loser. First, it’s going to spend tens of millions — and probably scores of millions if it persists in fighting this tax issue in states all over the country.

More important for Amazon, its corporate brand will be smeared from one end of the state to the other. Get used to “tax cheat.”

Ask Pacific Gas & Electric Co., Mercury Insurance Group and Valero oil whether they’d again try to enrich themselves in California voting booths.

But at least this new ballot brawl should benefit one sector of the California economy.

Dan Walters: Higher California fees are the epitome of fairness

The fire fee is conceptually similar to a new requirement that local redevelopment agencies must share their revenue to remain in business. Those agencies have been skimming about $5 billion a year off the top of the property tax pool before funds are distributed among schools and local governments.

The state must make up about $2 billion of that diversion to schools. So in effect, all state taxpayers have been subsidizing local redevelopment projects.

And then there are those college fees. One commentator went so far as to claim that when Republicans refused to go along with Brown’s pitch for additional tax revenue, they were indirectly imposing a tax on college students.

Balderdash.

A fee is a fee, not a tax. Taxes are involuntary but fees pay for specific non-mandatory services, such as college educations.

Roughly a third of California’s adults have four-year college degrees, so they have enjoyed low-cost educations at the expense of everyone else.

One could argue, with great validity, that everyone has a stake in having a well-educated workforce, but even with the fee increases, college in California is still highly subsidized and still a very good deal.

California State University fees will still be among the lowest in the nation vis-à-vis comparable institutions, according to data from the California Postsecondary Education Commission. University of California fees will be about average. And our community college fees are still rock-bottom.

Fair is fair, and the new fees that are causing such angst are very fair.

Will ballot measures test vested pension rights?

A local ballot measure in San Jose and a statewide initiative, both only proposals at this point, would attempt to cut the cost of public pensions promised current workers, believed by many to be “vested rights” protected by court decisions.

The watchdog Little Hoover Commission, warning in February that soaring pension costs could “crush” government, said cuts to new hires would not yield enough savings and recommended legislation allowing pension cuts for current workers.

A key point: The commission and the proposed ballot measures would not cut pension amounts already earned by current workers through years of service. The cuts (in benefits or employer contributions) only apply to pensions earned after the change.

The Little Hoover Commission said the courts have held that public employees have a vested right under contract law to the pension benefits offered on their first day on the job, even if it takes five years of work to qualify for them.

But the commission said the rulings, which differ from private-sector pensions that can be cut for future work, have provided openings to modify benefits for current workers that must be clarified.

“Government agencies cannot generate the needed large-scale savings by reducing benefits only for new hires,” said the commission. “It will take years if not decades to turn over the workforce, and the government is hardly in hiring mode today.”

The backers of the proposed ballot measures are already hearing from defenders of the vested rights of current workers.

A paper on vested rights issued by the California Public Employees Retirement System this month suggests the giant system, which covers half the non-federal government workers in the state, would go to court to protect the rights of its members.

Independent commission finishes drawing new districts

California’s fiest-ever independent redistricting commission finished drawing 177 new congressional, legislative and Board of Equalization maps late Sunday after a rare conflict over racial issues.

The new maps, which will be released to the public on Friday, are expected to generate a flurry of lawsuits and at least one referendum drive, all of which would, if successful, shift redistricting to the courts for final resolution before the 2012 elections.

Created by two ballot measures, the commission is doing a job that in the past had been done either by the Legislature or the courts. Overall, its districts – if finally adopted – are expected to give the state’s dominant Democratic Party opportunities to gain two-thirds majorities in the Legislature and increase its control of the state’s congressional delegation.

The 14-member commission – five Republicans, five Democrats and four independents – spent the entire weekend on final district-by-district reviews, making dozens of mostly minor changes that sometimes involved just a few people.

Enjoy your morning!