Monday, March 31, 2003

News: California closer to Net sales tax
California, the nation's most populous state, this week took a step closer to collecting tax on sales of consumer goods over the Internet--a move rejected by its governor in better budgetary times.

A tax committee of California's Senate on Wednesday approved two bills that would clear the way for the state to collect sales tax on goods sold by out-of-state vendors to its residents via the Web, a move that could help it recoup an estimated $1.75 billion in lost annual tax revenue.

When California's homegrown Internet sector was thriving, California Gov. Gray Davis was an opponent of online sales taxes, saying they could hamper the growth of then-booming dot-com companies.

But such concerns have been eclipsed by a recent study finding that California appears to losing more tax revenue to online sales than does any other state.

As the state looks to plug a $35 billion budget gap during the next 15 months, lawmakers and Davis are taking a second look at Internet sales taxes.

The first Internet tax bill would require California to join a group of 35 states and the District of Columbia, working to help states tax remote sellers, including those that operate online and via mail-order.

Members of that group known as the Streamlined Sales Tax Project were key players in a February deal in which eight major online retailers agreed to begin collecting taxes on behalf of about three dozen states. As part of that deal, the vendors were granted amnesty for any prior uncollected taxes.

California did not participate in that settlement and has remained on the sidelines on the issue.

"This isn't about 'taxing the Internet,' it's about equity, because people should be taxed on what they buy, not how they buy it," bill sponsor Sen. Debra Bowen, a Democrat, said in a statement.

Bowen said the current tax system gives every out-of-state businesses an instant 7.25 percent to 8.5 percent price advantage over California-based retailers that collect that sales tax at the point of sale depending on where it is made.
http://zdnet.com.com/2100-1104-994471.html

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