The high tech/Internet savior for the depleted California budget that wasn’t Facebook – at least not yet. California budget writers were so excited at the potential take from a Facebook IPO, that veteran Department of Finance spokesman, H. D. Palmer was quoted in the Washington Times in February, “If it is as big as it is being billed, then on behalf of a grateful state, I will go to Mark Zuckerberg’s house and either wash his windows or mow his lawn.”
Zuckerberg’s house may have dirty windows and long grass at the moment with Facebook stock losing about half its value since the IPO. The $1 billion-plus bump hoped for in the California treasury won’t come to pass.
However, there are other recent high tech/Internet stories that may see revenue increases to California coffers.
Over the weekend, Amazon began collecting sales tax on online purchases made from California. Amazon originally opposed California’s effort to collect taxes from online purchases, even threatening a referendum against a bill passed for that purpose by the legislature.
Instead, Amazon decided to make a deal with California officials. The retail giant pledged to locate warehouses in the state while state officials held off online sales tax collection for a year in hopes that a federal law would pass setting a uniform rate for online sales tax. Even though the concept of federal regulation always seemed the fairest solution, the year has ended without federal legislation and Amazon and other online retailers will now become tax collectors.
For California, that could mean about $100-million additional tax dollars from Amazon and $300 million from all Internet sales with rising numbers every year as Internet shopping grows. Not quite what the state hoped to achieve from the Facebook transaction, but a healthy haul.
The same week Amazon started collecting taxes, perhaps the biggest brand name in high tech appears to have hit another gold vein. Apple, headquartered in Cupertino, announced the release of the iPhone 5. The phone was sold out in one hour.
The Los Angeles Times put Apple’s extraordinary success in context.
The overwhelming demand, which intermittently shut down Apple’s website, fueled a rally in its shares, which hit an all-time high and raised the company’s market value to $648 billion. No company in history has ever been valued so high, not adjusted for inflation.
Apple is now more valuable than the gross domestic product of Denmark, Finland and Hungary — combined. And much of that growth has been on the back of the iPhone, which accounts for more than half of the company’s profit.
All those profits for a California based company should mean a boost to the state treasury. While, unfortunately, Apple is expanding its operations outside of California, it is building its new headquarters campus here and the company’s record setting sales will help the company’s home state.
And Mark Zuckerberg made public comments recently that Facebook would make a comeback. Let’s hope so.
The tech industry could help lead California’s budget out of the doldrums.