Just like they warned the California Legislature and California Governor Jerry Brown. Here is the termination letter I just received via e-mail:Well, at least Californians were forewarned.
Now, what about that assumption in the recently (last night) enacted California state budget? You know, the one that had the state realizing $200 million as a result of this tax.
Since all of the Amazon Associates, like me are now out of a job, guess that really is a ROSY Scenario and an “unbalanced” budget.
Over to you, California Controller John Chiang
A new grass roots small business organization, the Coalition to Protect Small Business Jobs has formed to ask California Governor Jerry Brown to veto AB 28 X, the Amazon Tax Internet Sales Tax legislation. I have posted a copy of the bill here.
From the press release:
Calling AB 28X’s new tax burdens on Internet sales a direct threat to small business and Internet entrepreneurship, the Coalition to Protect Small Business Jobs urged Governor Brown to veto the e-taxation bill approved by the California Legislature Wednesday.
“Without adequate protections for small businesses, this bill and bills like it across the country would make it even harder for us to compete with big retailers on the web, our last frontier for a more level playing field,” said Terri Hartman, Manager at Liz’s Antique Hardware in Los Angeles.
The 1992 U.S. Supreme Court Quill decision prohibits states from forcing businesses to collect sales taxes unless the business has a physical presence in that state. Bills like the one approved Wednesday attempt to get around that ruling by broadening the definition of physical presence to include those without a physical presence in the state.
“Small businesses create two of every three new jobs, account for more than half of all private sector jobs, hire 43 percent of high tech workers and drive innovation in a host of fields,” said Jessie Womble, State & Local Public Policy Manager at CONNECT – a non-profit organization that links inventors and entrepreneurs with the resources they need to succeed. “Protecting their ability to flourish on the Web should be of paramount concern to everyone.”
More than 17,000 small businesses in California have written letters to their state legislators in opposition to this legislation.
“The irony of this bill is that instead of producing more tax revenues, this unfair new tax burden would fall disproportionately on small businesses and result in fewer jobs and fewer state and local tax revenues,” said Bill LaMarr, Executive Director of the California Small Business Alliance.
The State Board of Equalization has reported that already small revenue estimates for the measure are subject to “considerable uncertainty,” don’t fully represent the likely loss of personal income to Californians and businesses and would be subject to years of delay as a result of expected litigation.
“The revenue figures for AB 28X are uncertain at best and this bill represents exactly the kind of budget gimmicks that Governor Brown is trying to correct,” said LaMarr. “We respectfully ask Governor Brown to veto this legislation and request the legislature to adopt real measures that will protect small business entrepreneurs.”
More information is available at www.ProtectSmallBusinessJobs.com.
Opponents of this e-taxation legislation include the California Small Business Alliance, NetChoice, California Business Alliance, Silicon Valley Leadership Group, TechAmerica, eBay, TechNet, Orinda Taxpayers Association, CONNECT and more than 17,000 small businesses throughout California including, Act + Fast Medical, TransTech Systems, 7daysale4u, Hamilton Tools, MRO Warehouse, Jones Vintage Parts, Electronics Nexus, Transition IT, Hall’s Window Center, Seabreeze Books and Charts , Liz’s Antique Hardware, Mannequin Madness, Valley Network Solutions and The Sticker Station.
But, before Governor Brown has a chance to veto this bill, there may be some problems with this legislation which I outlined here.
It is hard to say since California Proposition 25 language in the bill (tax increases requiring a 2/3?rds super majority) makes for some legal incongruity and the fact that Governor Jerry Brown vetoed the enabling California Budget bill .
It’s not clear if the bill will become law. It was part of the budget package approved Wednesday by the Legislature. Gov. Jerry Brown vetoed the main budget bill Thursday, and on Friday legislative staff members were determining whether the sales tax bill can still be legally sent to the governor separate from the budget, or whether lawmakers will need to vote on it again.
Brown told reporters in Los Angeles he believes the Internet tax is a “common sense idea.”
If he does sign the Internet bill, California could be in for a fight. Amazon and Overstock.com have threatened to sever ties with their California “affiliates” – thousands of businesses that earn commissions by referring customers to Amazon.
Amazon, probably the most aggressive opponent of the legislation, has already fired affiliates in several other states over similar laws, including two last week: Connecticut and Arkansas. It had no comment on this week’s developments in California.
However, should the legislature re-vote, pass the legislation and it is signed up Governor Brown (which is likely from his comments above), then Amazon and other retailers may sue anyway in either state court (the Proposition 26 requirement of increasing taxes by a 2/3rd’s super majority rule) or in federal court (the Constitutional Nexus issue.)
With the explosion in e-commerce, lawmakers in California and many other states have tried shifting the tax-collection burden from consumers to retailers – the same way brick-and-mortar transactions are treated.
Those efforts have been largely thwarted by a landmark 1992 U.S. Supreme Court decision involving a mail-order office-supply company. The court said retailers can’t be forced to collect taxes unless it has a “physical presence” in the state.
Nevertheless, several states have passed laws in the past few years forcing online retailers to collect tax. Lawmakers have attempted to get around the 1992 ruling by expanding the definitions of physical presence.
In California, with the legislation passed this week, that means subsidiaries doing business in the state. Amazon, for instance, employs 500 Californians at two subsidiaries in Silicon Valley, including one unit that helped design the Kindle electronic book reader.
California also says the retailer’s in-state affiliates constitute a physical presence. These affiliates are independent businesspeople who post links on their websites to Amazon and other e-tailers. When a customer clicks through and buys something from the e-tailer, they’re paid a commission.
Amazon and Overstock’s threats to dump their California affiliates, in retaliation for the tax legislation, has some of these affiliates rattled.
Ken Rockwell of La Jolla, who runs a photography website, said he earns much of his income from links to Amazon and other online sellers of camera equipment. If the bill becomes law, he and thousands of others would get cut off, he said.
“The only people who would get hurt are the people in the state of California,” Rockwell said.
Rockwell said he might move out of state as a result.
Well, I won’t be moving out of California because of the Amazon Tax, but can Californians really afford another costly expenditure of public funds paying lawyers to fight this for years in the courts?
What will likely happen is the bill will go back to the Legislature and pass. Then, Governor Brown will sign it into law. The law will go into effect on January 1, 2012, when Amazon and others will file their lawsuits. In the meantime, Amazon will close its two small divisions in the Silicon Valley (placing those employees out of work, at least in Califonria) and fire all of its Associates, including me.
And, the California budget will continue to be in a structural deficit with no increased internet sales tax revenue.
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.
Looks like Assemblywoman Nancy Skinner and Senator Loni Hancock are pushing their respective bills forward in the California Legislature. You remember them – tax increasing, job killing and probably unconstitutional laws.
Elsewhere at the Capitol, Democratic Assembly members Nancy Skinner and Charles Calderon and Sen. Loni Hancock tout measures they say will level the playing field for California businesses competing with online retailers such as Amazon.com.
The lawmakers will be joined by Bill Dombrowski, president and CEO of the California Retailers Association; Dean Murakami, president of the Los Rios Community College Federation of Teachers; and others at the news conference, which starts at 11:30 a.m. on the Capitol’s south steps.
Skinner’s Assembly Bill 153 and Calderon’s Assembly Bill 155 may come up for a vote Thursday in the Assembly Appropriations Committee. Hancock’s Senate Bill 234 passed the Senate 22-17 on May 5 and is now before the Assembly.
I guess the Democrats want to force the issue and tie California up in costly federal litigation, while killing California jobs, in the meantime. The California Legislature may impose and Democrat Governor Jerry Brown may dispose of this matter. But, this entire matter will go to the federal courts, if the Governor signs the bill(s).
Yeah and SB 234 which passed the California State Senate, pretty much grants authority to the California Board of Equalization to tax anything they deem constitutional under federal law – which means just about everything. Way to go California Legislature and Democrat majority, pass the buck to another elected agency to raise taxes for you.
See you in court, where more of my taxpayer money will be expended for no good reason.
eBay Says Let’s Make a Deal to California’s Internet Sales Tax Legislation – Part Two
Unsurprisingly, eBay has not been enamored with such efforts which would hit eBay sellers, and has been seeking to work into legislation a threshold designed to ensure that at least some of its out-of-state sellers will not be subject to California sales/use tax collection and remittance obligations where they sell to customers in the Golden State (California-based sellers who sell to Californians are already on the hook).
A possible threshold of $10,000 a year or less in sales to Californians has been reported, but sources say that eBay and/or some of its sellers want that limit raised higher– potentially up to $2 million per year.
EBay has its California sellers engaged in a grassroots lobbying effort aimed at forcing amendments to the legislation, which would defang it. No doubt eBay sellers located outside of California, who are currently not obliged to collect and remit sales tax on purchases made by Californians, are ecstatic about this. California-based sellers would not benefit from building in a sales threshold, though, especially a high one that could tilt the eBay marketplace distinctly to the advantage of out-of-state sellers. However, their legislators are being urged to make amendments that, if put through, could seriously reduce the already rather pitiful revenues that backers of the legislation claim they would obtain by ramming it through.
The very best case scenario, according to a Board of Equalization staff analysis produced earlier this year, was that this “revenue
enhancement” measure would bring in a measly $200-or-so million maximum in 2012-13.
Let’s see as we repeat – no real, substantive tax revenue for California, a loss of California jobs and a costly litigation. The Skinner Bill (AB 153) et. al is a loser all around.
But, it WILL proceed because the POLS will milk those who have a stake in the legislation for campaign contributions.
Eventually, this will die a quiet, but expensive death.
Here is a good video that summarizes the conundrum facing the California Legislature when considering the Amazon internet sales tax – the loss of revenue and California jobs.
I have written more about this issue:
California Board of Equalization member George Runner explains how the Amazon Internet Sales Tax Legislation which I have mentioned in numerous posts hurts California and California small businesses in particular.
First, it was Amazon.com which said that should AB 153 which imposes internet sales taxes passes they would terminate their California-based affiliates. Now, Overstock.com has weighed into the flap.
Board of Equalization Member Senator George Runner today released a letter from Overstock.com indicating that it will terminate its California affiliates should pending affiliate nexus tax legislation become law.
“This issue is much, much bigger than one company,” said Runner. “A law requiring outof-state retailers to collect sales tax from California consumers could force thousands of online retailers to terminate their relationships with California-based affiliate businesses. This hurts California jobs and revenues.”
In his letter, Mark J. Griffin, general counsel for Overstock.com, writes that his company has terminated affiliate relationships “in every state where this legislation has passed” and “will do so in California.”
According to Griffin, in 2009 Overstock terminated 3,200 California affiliates after the Legislature passed a similar measure. When the legislation was vetoed by the governor, Overstock attempted to reinstate those affiliates with marginal success. Griffin estimates the current number of Overstock affiliates in California is approximately 600.
George Runner is contacting leading online retailers with California-based affiliates in an effort to quantify the potential impact their response to an affiliate nexus law could have on jobs and revenues.
Runner said, “Taxes have consequences. Too often we assume companies and individuals will keep acting the same after new tax laws are passed. That is simply false. Businesses change their behavior as tax laws change.”
“Supporters of this proposed policy claim that they want to create a level playing field for businesses that have retail presence in California and are required to collect sales tax. Unfortunately, none of the bills under consideration will level the playing field because out-of-state online retailers will simply modify their business model to avoid collecting California’s sales tax.”
Runner added, “There are 25,000 Internet affiliates in California who are at risk of being wiped out by this attempted sales tax grab. This law will kill jobs and cost the state revenue as these individuals and businesses close up shop in California.”
Well, there you go. In the attempt to unconstitutionally grab some additional tax revenue, California Democrats are proposing legislation that will not only increase taxes for California consumers but also cost California thousands of jobs.
This idea of internet sales taxes for out of state retailers sounds like a “LOSE – LOSE” to me.
Robert Ingenito, Chief of Revenue Estimates, California State Board of Equalization
While the Amazon Online Sales Tax legislation is in “suspense,” Americans for Tax Reform make this point – the legislation will require a 2/3’rds super majority in the California Legislature.
As it would happen, proponents of AB 153 are operating under the faulty assumption that approval can be had with a simple majority vote of the legislature. Not so fast. As a result of Proposition 26, which California voters approved with over 52% of the vote just last November, lawmakers can no longer get around the two-thirds majority vote requirement to raise taxes simply by denying that what they are imposing is, in fact, a tax increase. Yet that is precisely what Skinner and company are doing in attempting to pass AB 153 with a simple majority vote. Skinner herself claims that AB 153 will yield an additional $250-500 million in taxpayer dollars for state coffers in year one. Objective analysis can only conclude that Rep. Skinner would ultimately find her simple majority assumption to be as valid her assertion that her bill wouldn’t cost jobs.
Proposition 26 amended the California constitution so that – according to the language of the law – “Any change in state statute which results in a taxpayer paying a higher tax,” which is the goal and purpose of AB 153, is subject to a two-thirds vote requirement. Online sales tax proponents might have had a shot at getting a simple majority, not so with a two-thirds threshold.
Yes, this is my reading of the law. A two-thirds vote will be required for passage in the Assembly and State Senate. This means there will have to be some Republican votes – a highly unlikely occurrence.
And, the passage of Proposition 26 was a little heralded silver-lining in the GOP wipe out in last November’s California election. This little proposition will have long-lasting impacts on the growth of California government.