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California Internet Tax Bill Tied To Affiliate Programs Is Delayed
By Tom Ajava
California small businesses are breathing a sigh of relief. The much despised California Internet tax bill has been tabled until the next legislative session and will not be passed until January 2010 at the earliest.
Many people expected the recent economic mess to create a situation where millions were in bread lines. While plenty of people are hurting, the assault has been more indirect, but definitely follows a domino effect. How so? The massive wealth lost in the housing market has created a sharp cut in property tax revenues across the countries. This has left states swimming in read ink and looking for any possible way to raise money.
The State of California is in a vast economic hole. With billions of dollars of debt on the books, the state has started throwing around all kinds of ideas to raise taxes including legalizing marijuana. Another controversial idea has been the prospect of recovering taxes off the web, a prospect that would greatly damage small businesses.
Known as AB 178, the proposed bill is a business killer. The goal of the bill is to make out of state retailers pay tax in California. California, of course, has no jurisdiction over these retailers. To overcome this, the proposed law would find that any retailer who puts an ad on a publisher’s site that
is based in California [and gets a sale] would be submitting to jurisdiction. Once in the jurisdiction, these sites would then have to pay sales tax to California on all sales involving California residents.
This wayward bill is mind boggling counter-productive. Why? It will destroy tens of thousands of small businesses in the state. How so? Most of these businesses are making money through sales on the web. This bill will make such programs obsolete as retailers walk away from the programs. Keep in mind that these retail sites can make direct sales to California residents and not pay any sales tax, so why deal with the problem?
A similar bill was signed into law in New York. As with California, New York was seeking new tax revenues. Guess what happened? Over 3,500 programs canceled their New York accounts. Businesses failed and the web based small business person took it in the pants. California risks the same result.
AB 178 is off the table for the moment, but not forever. You can be that California politicians will take up the measure again in an effort to raise revenues for the massive spending plans. Inevitably, this will lead to the passage of some type of web sales tax bill and the end of many small businesses in California.
Thomas Ajava writes about internet law for the attorney directory at FindAnAttorneyforMe.com.
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