California Tries To Use Affiliates To Get Internet Sales Tax
California is gearing up to try to use affiliates to get internet sales tax from internet companies ranging from small mom and pop stores to giants like Overstock and Amazon.
California is an amazing state. It is the eighth biggest economy in the world, yet one of the worst run states in the country. Despite punitive fees like an $800 annual fee on business entities for the “privilege of doing business in California”, the state always seems to be in a financial black hole and on the cusp of bankruptcy. Instead of fixing its problems, the state tends to take the tack of trying to find new tax revenues. With this in mind, it has been focusing on the prospect of internet sales tax as a gold mine.
Multiple bills have been introduced on the subject, but none have been signed into law…yet. All deal with the issue in pretty much the same way. They try to argue that any internet company that does business in California must pay sales tax on such transactions. Just selling products to people in the state is very iffy legally, so the bills contain language that states that if the companies have affiliates in California who produce sales for them, then the companies are considered to have submitted to jurisdiction and must pay the taxes.
As you might imagine, this approach has raised a rather large ruckus online. New York did a similar thing. Guess what happened? Amazon and other bigger retail companies simply terminated all their affiliates in New York! Instead of receiving additional revenues through internet sales tax, the state lost revenues when the affiliate businesses went out of business!
Try as they might, California legislature representatives have not been able to come up with a bill that will become law. The “Govenator” has said he won’t pass the bill, but California is hurtling towards another annual budget deficit in the billions. Ultimately, it appears to only be a matter of time before the law is passed. At that point, you can expect a large number of affiliate businesses in the state to fail. How sad.