California Bill Directs Online Retailers to Collect Sales Tax

California would require online retailers including Inc. to collect sales tax on Internet purchases by state residents under a bill passed by the Assembly.

The bill, approved 47-16 yesterday, directs retailers that have a physical presence in the state to collect sales taxes on online transactions. Such a tax may net $83 million a year, according to the California Equalization Board, the authority that collects sales and use taxes in the state.

“If you don’t support this bill, you support tax evasion and you’re antibusiness,” the bill’s author, Assemblyman Charles Calderon, a Democrat from Montebello, said before the vote. He estimated that the state loses $1.15 billion a year in uncollected sales and use taxes.

The bill is one of four measures before lawmakers in the most-populous U.S. state intended to increase tax collections from online sales. California is home to Apple Inc., whose iTunes site accounted for 69 percent of all digital downloads in the U.S. as of September, according to research firm NPD Group Inc., and to EBay Inc., the online auction site with $2.22 billion in second-quarter revenue.

Amazon, the world’s largest online retailer, has threatened to sever ties with more than 10,000 affiliates in California over the sales taxes. In February, the company said it would close a facility in Texas over a similar issue.

Mary Osako, a spokeswoman for Seattle-based Amazon, and Jeffrey Leacox, a lawyer in Sacramento representing online retailers including Amazon, didn’t respond to telephone calls seeking comment.

Constitutionality Questioned

Such a bill as the Assembly passed may be unconstitutional, Paul Misener, Amazon’s vice president for global public policy, said in a Feb. 24 letter to George Runner, a member of the Equalization Board.

The U.S. Supreme Court forbade states from requiring retailers without a physical presence in the state to collect taxes, Misener said. Instead, buyers are supposed to self-report and pay taxes on their purchases. Misener wrote that Amazon itself does not have a physical presence in California.

“If any of these new tax-collection schemes were adopted, Amazon would be compelled to end its advertising relationships” with more than 10,000 California-based Web marketers, Misener said in the letter to Runner. “Job and income losses and little, if any, new tax revenue” have resulted from such measures in other states, he said.

The California Legislature passed a similar online sales-tax bill in 2009 that was vetoed by then-Governor Arnold Schwarzenegger, a Republican.

Assemblyman Bill Berryhill, a Republican from Ceres, said local businesses have been clamoring for the tax measure.

“This bill levels the playing field for those businesses in California,” Berryhill said before the vote. “Not a day goes by when I don’t hear from businesses about their ability to compete.”

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