In a beautiful demonstration of how little the American liberal understands about business, revenue and the economy, the Governor of California has signed into law a piece of legislation that shows his undeniable kinship with the Messiah, Harry Reid, Dick Durbin, Chuck Shumer, Nancy Pelosi, et. al.
Tax on Affiliate Internet Sales to Guarantee Net Revenue Loss
We went through something like this in Texas last year. The issue was collection of sales tax on internet sales by Amazon that are handled by their massive fulfillment center within the state. The rationale has been that sales tax can be imposed on an internet sale when the retailer has a brick/mortar outlet in the state.
That makes sense if you are dealing with a store-front that sells product to customers who walk in the door and then also offers sales through internet orders. You have a mechanism in place for the accounting, incorporating, consolidating and submitting of the tax to the state and local governments. It is all quite clear with regard to what the local jurisdiction tax levies are.
When you take an entity that has no open retail door but only an internet portal, then it gets more complex. The "sale" takes place at the location of the host server in most estimations, not the point of boxing the product and shipping it which could be many states away.
In a fulfillment in Texas, the state claimed that the sales were occurring in the shipping center. If you tax the product in TX, what does the customer in Ohio or Wyoming owe to their state? Do you have an expectation of collection to both states? That clearly would be an unfair burden on the consumer and maybe even merit the Revolutionary War cry of "taxation without representation."
Do you require the online retailer to maintain a data base and computations for all the millions of combinations of tax levy that comprise sales tax throughout the land? With changes occurring every election cycle, that would be an onerous task.
Can you possibly ignore the fact that this would hamper sales and cut revenues? Is it unclear that this would raise costs to purchasers and hence impact the economy?
What drove the point home in Texas was a simple threat by Amazon to close the fulfillment center and move the entire 1000 job workforce to another state. That was a relationship that California might want to review.