The California Senate passed a bill last week that would force internet merchants to pay sales tax to the state for sales done within California.
The purpose behind such a tax is similar to the legislative intent behind the oft-forgotten “use” tax. Essentially, a buyer can cross state lines and buy an item in a state that has less sales tax. The sales tax, as it is collected at the point of sale by the seller, is a burden on in-state companies since they are often required to collect it and to remit it to the state. If buyers go out of state to purchase items, due to sales tax, the local and in-state businesses suffer.
Implementation problems, however, have aided many online purchasers to evade this tax. The impetus for this tax only really comes on the state’s radar through other agencies, most of the time. An example of this would be the out-of-state purchase of an automobile. When that automobile is registered in-state with the DMV, the state comes to learn of the purchase and will often tax the buyer for using the car in state, assuming no sales tax was paid. In some states, it may be possible to offset the use tax with the sales tax paid in the other state.
The New York law was contested in court by the online retailers. The future of the California law remains unclear. Will it become law, or will it hear “hasta la vista” from Gov. Schwarzenegger?
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