Some $220 million annually in sales tax is not being collected by California cities and counties.
To put that in perspective it is the equivalent of the salary and benefits of 1,466 firefighters and police officers.
Another $1.1 billion in sales tax isn’t being collected each year by the State of California. While it wouldn’t plug the $27 billion budget gap it would help relieve the pain a bit.
So who are the scoundrels that are getting away without paying sales tax?
Anyone who uses the Internet to make a purchase from a company that doesn’t have a physical presence in California.
A 1992 court ruling based on laws on the books before then prohibits a state from collecting sales tax on a retail transaction unless the seller has a physical presence in that state.
That was long before the Internet came around and changed the world.
You might ask why nothing has been done to change the laws. Well, for years the Internet start-ups were greasing the palms of politicians all over the country to fight back attempts to treat them the same as brick and mortar retailers. Politicians justified the status quo by saying there was a need to encourage innovation.
Now that innovation has eroded the tax base of California by billions upon billions of dollars in recent years, politicians are starting to see the light.
Ironically, they say it is a matter of fairness that brick and mortar retailers should be on a level playing field with the Internet firms.
What a joke. A level playing field wasn’t necessary when states were being flooded with tax revenue fueled by the housing bubble that made wealth out of non-existent equity that people used to go on frenzied buying sprees.
Fairness wasn’t much of a concern when politicians watched mom and pops that weren’t contributing to their re-election campaigns in the manner that the e-Bays of the world do disappear one-by-one. It is just another example of why some type of serious campaign reform is needed that doesn’t hold elected politicians beholden to special interests.
And the Internet is a particularly dangerous special interest. It is not because they are cutting edge but because of the insane amount of speculative money that pours into start-ups and venues such as Facebook that are believed to have great potential to generate profit but have yet to live up to the promised hype of get-rich-quick investors.
When the money was flowing, no one looked beyond the moment to weigh the fairness and viability of government taxing policies. The mega-millionaires - many of whom were 20-Somethings when a number of high techs firms started - created a potent elixir that blinded politicians to the need to look long range.
Now we have a coalition known as the Alliance for Main Street Fairness finally pushing back. And the only reason politicians are jumping on board is because state budgets are sowing the fruit of their short-sightedness.
The new group involves moms and pops as well as retailing giants like Wal-Mart and Target.
The reason is abundantly clear in a Wall Street Journal comparison of the same products purchased in Houston at the two stores as well as through Amazon.com
A Playstation 3 at a Houston Target with sales tax included cost $325.90 ($299.99 before sales tax) while at a Houston Wal-Mart it cost $324.90 ($299.00 before sales tax). Yet a Texan could buy the same thing on Amazon.com for $299.99 because it included no sales tax.
The units all sold for within 99 cents of each other before sales tax was tacked on.
The price difference essentially is the sales tax.
So if you spend $300 on consumer goods at a brick and mortar you’re paying $25-plus toward providing public safety services and other government services. Yet if your neighbor goes online and buys the same thing he’s getting a somewhat freer ride when it comes to paying for government.
If you think changing things would stick it to the consumer, guess again. Amazon, if so forced, would have to lower their prices by $25 or so on that Playstation if they had to collect taxes. They could afford to do that because their overhead is much lower as they don’t have stores and a heck of a lot less employees.
Amazon is fighting to keep the law in place not to protect market share but to protect an inflated profit. They would still have a robust profit margin even if they collected sales tax and rolled back prices to compensate for it. It wouldn’t cost the consumer anything more and government would have critical revenue to pay for services.
The only real benefactors from the laws in place are the owners of Internet firms who are not just getting richer but filthy richer thanks to an antiquated tax law.
To put that in perspective it is the equivalent of the salary and benefits of 1,466 firefighters and police officers.
Another $1.1 billion in sales tax isn’t being collected each year by the State of California. While it wouldn’t plug the $27 billion budget gap it would help relieve the pain a bit.
So who are the scoundrels that are getting away without paying sales tax?
Anyone who uses the Internet to make a purchase from a company that doesn’t have a physical presence in California.
A 1992 court ruling based on laws on the books before then prohibits a state from collecting sales tax on a retail transaction unless the seller has a physical presence in that state.
That was long before the Internet came around and changed the world.
You might ask why nothing has been done to change the laws. Well, for years the Internet start-ups were greasing the palms of politicians all over the country to fight back attempts to treat them the same as brick and mortar retailers. Politicians justified the status quo by saying there was a need to encourage innovation.
Now that innovation has eroded the tax base of California by billions upon billions of dollars in recent years, politicians are starting to see the light.
Ironically, they say it is a matter of fairness that brick and mortar retailers should be on a level playing field with the Internet firms.
What a joke. A level playing field wasn’t necessary when states were being flooded with tax revenue fueled by the housing bubble that made wealth out of non-existent equity that people used to go on frenzied buying sprees.
Fairness wasn’t much of a concern when politicians watched mom and pops that weren’t contributing to their re-election campaigns in the manner that the e-Bays of the world do disappear one-by-one. It is just another example of why some type of serious campaign reform is needed that doesn’t hold elected politicians beholden to special interests.
And the Internet is a particularly dangerous special interest. It is not because they are cutting edge but because of the insane amount of speculative money that pours into start-ups and venues such as Facebook that are believed to have great potential to generate profit but have yet to live up to the promised hype of get-rich-quick investors.
When the money was flowing, no one looked beyond the moment to weigh the fairness and viability of government taxing policies. The mega-millionaires - many of whom were 20-Somethings when a number of high techs firms started - created a potent elixir that blinded politicians to the need to look long range.
Now we have a coalition known as the Alliance for Main Street Fairness finally pushing back. And the only reason politicians are jumping on board is because state budgets are sowing the fruit of their short-sightedness.
The new group involves moms and pops as well as retailing giants like Wal-Mart and Target.
The reason is abundantly clear in a Wall Street Journal comparison of the same products purchased in Houston at the two stores as well as through Amazon.com
A Playstation 3 at a Houston Target with sales tax included cost $325.90 ($299.99 before sales tax) while at a Houston Wal-Mart it cost $324.90 ($299.00 before sales tax). Yet a Texan could buy the same thing on Amazon.com for $299.99 because it included no sales tax.
The units all sold for within 99 cents of each other before sales tax was tacked on.
The price difference essentially is the sales tax.
So if you spend $300 on consumer goods at a brick and mortar you’re paying $25-plus toward providing public safety services and other government services. Yet if your neighbor goes online and buys the same thing he’s getting a somewhat freer ride when it comes to paying for government.
If you think changing things would stick it to the consumer, guess again. Amazon, if so forced, would have to lower their prices by $25 or so on that Playstation if they had to collect taxes. They could afford to do that because their overhead is much lower as they don’t have stores and a heck of a lot less employees.
Amazon is fighting to keep the law in place not to protect market share but to protect an inflated profit. They would still have a robust profit margin even if they collected sales tax and rolled back prices to compensate for it. It wouldn’t cost the consumer anything more and government would have critical revenue to pay for services.
The only real benefactors from the laws in place are the owners of Internet firms who are not just getting richer but filthy richer thanks to an antiquated tax law.
