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Wednesday, May 18, 2011

Internet Sales-Tax Debate Comes to California

Andrew Asch (ApperalNews.net)
April 29, 2011

State legislatures in South Carolina and Texas this week approved measures to require online retailers to pay state sales taxes, and California might jump into this fray next.

A bill before the California State Assembly, AB155, was approved by a legislative committee on April 25. It will require out-of-state online retailers such as Amazon.com and Overstock.com to pay state sales taxes, from which they have been exempt since the 1990s. The assembly might vote on it in June, according to Tom White, the chief of staff for bill sponsor Charles Calderon (D–Whittier.)

If passed, the state might bring in $6 billion in tax revenue, according to a 2009 University of Tennessee study. The sum will help whittle down California’s $25 billion-plus budget deficit.

But online retailers have reacted with tough action to other states’ attempts to collect sales taxes. In March, Amazon and Overstock refused to pay sales taxes in Illinois and cut business ties to their Illinois affiliates when that state’s governor, Pat Quinn, signed a law changing these online retailers’ tax status.

Arlington, Va.–based Retail Industry Leaders Association has contended that ecommerce retailers have enjoyed a free tax break for too long.

“This is revenue that is owed,” said Jason Brewer, a RILA vice president of communications and advocacy. “It makes more sense for legislators to collect taxes that are owed rather than raise taxes.”

Advocacy group The Alliance for Main Street Fairness, also based in Arlington, contends that bricks-and-mortar retailers are bearing a heavy burden for sales taxes while wealthy Internet retailers have shared no responsibility. “There is no reason to treat online sales differently than purchases made in a store,” said Eric Bearse, a group spokesperson. But sales taxes would hurt businesses in times of weak economic recovery, said the Washington, D.C.–based Computer & Communications Industry Association (CCIA). It also would unnecessarily burden them with an administrative nightmare, said Heather Greenfield, a CCIA representative.

“CCIA has long opposed taxes on e-commerce as burdening online vendors with the task of sorting through the policies of thousands of taxing authorities around the country and serving as revenue-collection agencies for each of them. Mom-and-pop businesses would likely close if faced with such a legal and accounting nightmare,” Greenfield said.

In a February 2008 New York Times blogdistributed by RILA, Reed Hastings, Netflix’s chief executive, was quoted stating software programs are published that will easily figure out how much sales tax e-commerce retailers owe.

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