California Internet Sales Tax Bill On Way To Governor
The California legislature is trying to get a law passed to create an internet sales tax on companies like Amazon. The bill is just about to the Governor, which means deadline time.
The California government structure is an interesting political conundrum in that Democrats control the legislature while a Republican, Governor Schwarzenegger, must sign off on any new laws. This is proving problematic because the state faces huge deficits each year and has found no real way to fix them.
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The primary problem is a political one. The Democrats prefer to raise taxes to solve the problem. The “governator” prefers to cut taxes to deal with the problem. The two clashing standards result in a situation where neither really gets what it wants and the state suffers year after year.
The latest test of the political process is the rather strange internet sales tax initiative. Often called the “Amazon tax”, the state seeks to pass a law that would force any online companies to pay tax if they have an affiliate in California. The argument is simply that brick and mortar stores in California have to, so why not web companies?
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The bill is problematic for two reasons. First, it would raise a tiny $150 million which means nothing compared to the 50 billion or so in deficit. Second, this type of bill has backfired in other states. When passed by locations like New York, many online retailers have simply cut off all affiliates in that state.
So, will this bill become law? It has been passed by the state senate already and should fly through the assembly. Then it is on to the desk of the Governor. He says he will not sign it and has rejected previous bills of this type. Whether he does so again is anyone’s guess given the horrid economic environment that is leading to huge deficits.