California Democrats continue to pursue constitutionally dubious bills aimed at forcing online-only retailers with no physical presence in the state to collect and remit sales tax.
However, having realized that this type of legislation could cause remote sellers to flee California-based eBay, it appears that one of the bill’s authors, Assemblywoman Nancy Skinner, is discussing tweaks to her legislation to lessen the impact it has. From professional site Tax Analysts (subscription required):
“Yes, I’ve met with eBay quite a lot,” said Assembly member Nancy Skinner (D), who introduced the bill. Skinner told Tax Analysts that eBay is concerned about the proposal’s impact on lower-volume sellers, and the two sides have discussed raising the $10,000 threshold.
Internet auction giant eBay Inc. is negotiating language in a proposed California “Amazon” law (AB 153) in hopes of reducing the number of its sellers that could be required to collect sales taxes.
The click-through nexus legislation would require remote sellers to collect state sales taxes if they make $10,000 or more in annual sales through California affiliates that receive a commission. Much of the attention has centered on Amazon.com, but eBay — a California-based company — also receives commissions from its sellers, who could then be required to remit California sales taxes.
“We hope to come to a threshold that they feel good about,” Skinner said. “But I’m certainly not going to be making the law ineffectual.”
Unfortunately for Skinner and fellow tax-and-spenders, critics say that carve-out or no carve-out, her bill, were it to become law, might prove ineffectual.
The argument goes like this: Estimates of how much the bill would bring in absent eBay tweaks have ranged from net negative sums to just $200-or-so million per year. Including the eBay tweak would keep more small sellers with eBay but still would not deal with possibility that big sellers, who sell more than $10,000 worth of goods per year to Californians, would be hit with new tax obligations were they to continue selling through eBay. Were those sellers to move their businesses to Amazon, which allows non-Amazon sellers to sell through its site, which is not based in the state, and which has threatened to terminate its California affiliates if the bill passes, those obligations would fall away.
The bottom line, according to opponents: The bill, even if tweaked, still offers massive incentives for eBay sellers to ditch; that, in turn, would impact eBay’s revenue stream and profits and indeed the amount of tax it remits to California, while potentially delivering up no new revenue to the state.
California continues to face a massive, $26 billion budget gap, and Skinner remains convinced her legislation can help close that.
However, the state also remains plagued by high unemployment of 12 percent and critics charge that in addition to the probability that this legislation could have an underwhelming or even non-existent budgetary impact, it could cause job losses in the online advertising sector.
Gov. Brown has not voiced support for the bill, but has not been forceful in rejecting it as former Gov. Schwarzenegger was.