Now I dont like getting political but this new law effects many people in many ways and should have never been passed IMHO. The main goal of this bill was to gain 200+ million in new taxes to help with the budget but in fact will end up costing the state perhaps that much or more. All they had to do was look at other states where it has been tried and see that it has failed.
So what is this new bill? Well before this law only businesses with a ‘Physical’ presence in CA were required to collect sales tax from purchases here. So online retailers that did not have an actually physical presence in California (i.e. and actual storefront) did not have to collect sales tax and then pay it to the state. This has been upheld by the Supreme Court. So California passed this law to define what a physical presence is. Basically saying that an online companies affiliates are a physical presence and therefore they must collect sales tax.
So lets take the first point why this will not work. It has been tried in a few other states and all companies like Amazon did is say ok and cancel all their affiliates in that state. Guess what, within a few hours of the law being signed we all got letters from Amazon and others that our affiliate accounts have been closed. So bottom line no sales tax collected still, no 200 million for the state. Some may be pissed at Amazon for this but hey its a business and they have the right to do it. They feel the law is wrong and it will put a burden and cost on their company, so rather than do it they will find a way out of it. Now the second part of this. It was estimated there were at least 20,000 affiliates in CA. These range from individuals just collecting a second income from their hobbies to full businesses that had employees (some totally built around affiliate sales). Well these 20,000 affiliates are no longer making sales from Amazon and dozen of other affiliate programs. This was income these people were earning and yes they paid income taxes on it. So now not only is the state not going to collect the 200 million in new taxes, but they are going to lose the income taxes off all the sales that were made. We can even take this a bit further as some of these were businesses with employees. Now that they have lost a major income stream most likely they will have to lay off some employees or even close their doors. These people or now on unemployment or even welfare of some sort, further costing the state more money. Some of these business will also just up and move to another state, taking with them again the income taxes they and their employes with them. Even the State Tax Agency (BOE) States that this will cost California.
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board vice chairman Michelle Steel maintain that the new law is unconstitutional. “This law will not only hurt those Californians now out of work, but also the businesses where they used to shop,” Steel said in a prepared statement. “Though the legislature has required BOE to carry out this misguided law, it will create no new revenue and instead cost the state lost income taxes from lost jobs and expensive legal fees from drawn out litigation.”[/div3]
Some people say that with out this law companies like amazon had an unfair advantage over others in the state that had to collect the sales tax. This law was just leveling the playing field. Well I have a couple thoughts on that. For one in areas like San Diego County the sales tax is going to vary depending on what city you shop in. For instance Im in Santee where it is just the states 7.75% but the neighboring city of El Cajon has a sales tax rate of 8.75%. Does that give shops in Santee an unfair advantage over shops in El Cajon, well perhaps but you dont see laws going into effect saying every city has to charge the same sales tax to make it fair. I also believe that if a new company comes out with cheaper prices than you you dont cry foul and try to legislate the playing field. Instead you come up with ways to improve your business and service to set yourself apart from your new competition. Im also in custom photography. I dont go crying about sears photography and ask the state to pass a law making them charge the same amount. I make my photography service better and more desirable.
Another aspect some people to quite see is that they are saying that ‘Amazon should be paying the tax’ and this way of thinking is flawed. Amazon no matter what is not ‘paying’ any tax, they would be ‘collecting’ taxes. Who is going to be paying them…. you and all those that shop at Amazon. Actually this is already law, if you purchase something online and sales tax is not collected you are already legally required to keep records of this and pay it. This is obviously very hard to enforce though so they are trying to place this burden on the online retailers.
Ultimately this will be settled in Congress as they have the power to regulate interstate commerce, not the states, and Amazon has said as much and they would abide by a national law which really does ‘level the playing field for all’ but in the short run this law hurts many families and the state. Amazon is backing a ballot measure that would overturn the law, if enough signatures are collected to put the measure on the next ballot then the law would be put on hold until the election was held.
This is my two cents to the situation. As an affiliate marketer I’m of course not happy with being canceled and am looking into ways around it to get back to earning. I can see others point of views on it as well but feel this law was not the right way of going about it and most likely will not hold up in court over all, and will cost the state and its residents even more in legal fees.