Internet tax budget gimmick will lose the state revenue

Assemblywoman Nancy Skinner stood on the steps of the Capitol to announce her
online sales tax legislation, it was no surprise to see the usual suspects dead
set against spending reductions backing her up. But the reality is that
California has a $25 billion overspending addition to solve, and contrary to
Skinner’s claims, her Internet tax budget gimmick will actually lose the state
revenue by putting thousands of Californians out of business.

claims her Internet tax proposal – which attempts to force out-of-state online
retailers to collect tax on California sales – will bring in $300 million. That
happens to be double the amount a Board of Equalization report concluded, and
its claims are also questionable.

Supreme Court law says California can’t force a retailer to collect tax unless
they are located in the state. Skinner’s bill tries to get around this by
assuming a retailer has a presence in California if they merely advertise
through an in-state affiliate. The reality is, it’s a scheme unlikely to pass
legal or practical muster: to avoid collecting Skinner’s unconstitutional tax,
online retailers will end advertising contracts, putting 25,000 individuals and
small businesses in California out-of-business. This is precisely what happened
in Rhode Island and North Carolina when identical laws were passed.