California lawmaker pushes to tax online sales


A Berkeley lawmaker, backed by a coalition of large and small retailers, is pursuing a controversial bill to require Inc. and many other Internet retailers to collect sales taxes on purchases made by California consumers.

Democratic Assemblywoman Nancy Skinner touted a bill Wednesday that she said could raise $300 million in badly needed state and local government revenue this year. It’s at least the third such effort by state lawmakers in the last three years.

Similar legislation was approved in 2009 as part of a proposed state budget but was vetoed by then-Gov. Arnold Schwarzenegger. The new governor, Jerry Brown, who is scrambling to fill an estimated $25-billion budget shortfall, hasn’t taken a position on the issue, Brown spokesman Evan Westrup said.


Collecting taxes on most Internet sales is a question of treating all competing businesses fairly, supporters argued.

“This legislation will close the current loophole in tax law which has allowed out-of-state companies to avoid collecting California sales and use tax,” Skinner said.

A number of court decisions have ruled that companies that don’t operate stores, warehouses or offices in California do not have to collect sales taxes from customers and turn the money over to the state.

As a result, companies such as Amazon are able to offer books and hundreds of other products for about 10% less than in-state sellers, Skinner said.

“We are at a serious competitive disadvantage against out-of-state, online retailers who pay no taxes,” said Gene DeFelice, vice president of Barnes & Noble Inc., whose 100-plus stores in California collected $45 million in sales tax last year.

Beyond direct Internet transactions, Amazon boosts its California sales by relying on a network of local website operators who earn commissions as affiliates by directing some of their traffic to the Seattle company. That network, critics claim, creates a basis to require Amazon to collect sales tax from all its California customers.


Skinner’s bill could put some of those small websites out of business, said Rebecca Madigan, a spokeswoman for 25,000 Amazon affiliates in California.

“Out-of-state retailers will simply stop advertising on the California websites to avoid having to collect California sales tax,” she said. “So, at the end of the day, California website advertising income is cut off, and the state doesn’t collect sales tax revenue.”

Amazon did not respond to requests for comment on the Skinner proposal.