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Lawmakers push for tax on e-commerce

February 19, 2010 12:00:00 AM PST
The state has taken a tentative step down what many in the Silicon Valley fear is a very slippery slope -- taxing your purchases over the Internet. The State Senate has approved a bill many are calling the "Amazon tax."

The state loses more than $1 billion a year because all online retailers do not charge sales tax often times, and lawmakers think they can recoup a small fraction.

Tens of thousands of California-based websites, like Newsblaze.com, make money by posting links to such sites as Amazon.com.

If a NewBlaze reader buys something from that link, NewsBlaze gets a commission, while the buyer often pays no sales tax.

A new measure passed by the State Senate would force Amazon and other online retailers like them to charge sales tax. It could bring in more that $100 million a year to the cash-strapped state.

"Because I'm here, they're saying I'm actually selling, which I'm not. All I'm doing is putting the Amazon ad on my site," Alan Gray from Amazon.com affiliate said.

Supporters of the tax insist it's a way to level the playing field with brick-and-mortar stores. The law is if retailers have a physical store in California, they have to charge a sales tax, even online.

No presence -- no sales tax. Critics say affiliates like Newsblaze.com should be treated like stores in California because their sales force is here.

"They drive the traffic to an out-of-state company, and these companies claim 'Oh, we don't have a presence in California," Lenny Goldberg from the California Tax Reform Association. "What you have is a whole industry that has grown up around tax avoidance."

Amazon didn't return our call, but in some states that have this tax, online retailers severed ties with their affiliates, costing jobs. Gray fears the same could happen in California.

"These people will have no income. They'll have to lay off those people," he said.

Online shoppers aren't that thrilled either about having to pay sales tax on some purchases.

"I'd probably be choosier about what I buy. I might not do so much impulse buying," online shopper Barbara McCall.

Supporters of these proposals say this is not a new tax. The California State Income Tax form has a line for you to enter the sales tax you didn't pay for online purchases in that year, but hardly anyone pays it.


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