10 November 2011

YES On Tax Fairness

Something I voted for actually won.

I can hardly believe it. This never happens.

Except this time we managed to beat the Howard Jarvis-inspired, Prop 13-inspired, difficult two-thirds rule on tax increases – by a whopping nine percent over the required two-thirds affirmative.

Local taxpayers consulted both their wallets and their consciences and voted a one-eighth of a cent sales tax increase into law by an approximate ratio of 11 to 3, countywide. Hooray and congratulations!

Soon, Mendocino county will open libraries five days a week instead of three; can afford to reinstate after-school programs for children; can once again purchase significant numbers of new books; will “not only survive but thrive,” as one librarian said.

On a closely related subject, you may have heard about the shady tax break some Internet companies offer California customers by failing to collect state sales tax on their purchases.

Californians who don’t pay sales tax are supposed to pay an equal use tax instead. Few do.

State law requires purchasers to pay tax on tangible property “used, consumed or stored” here. According to the law, “Consumers in California owe use tax on purchases from out-of-state retailers when the out-of-state retailer is not registered to collect California tax, or for some other reason does not collect California tax.”

Booksellers have been in the vanguard of a nationwide effort to change this situation – to level the buying field and increase fairness, not to mention needed revenue for the state. They ask why a book purchased in a California bookstore costs an additional 7.25% in state tax plus local tax, when the same book purchased from Amazon, for example, is in effect completely tax free?

Many forces are coming together in an effort to fix this, not only in California but in other states losing out on millions in dollars that the law says is owed but is rarely collected.

The big news recently was the announcement that a bipartisan – if you can believe it – bipartisan group of US Senators introduced the so-called Marketplace Fairness Act, which would grant states the authority to compel online retailers to collect sales taxes.

The proposed legislation would ensure that online retailers collect taxes, while dealing with concerns raised by smaller online vendors who fear they would be unfairly impacted. The proposed law would exempt online sellers whose annual sales are less than $500,000.

The National Retail Federation came out in favor of this version of the proposed law. Their CEO said, “In a 21st  Century retail industry, we ought to have a 21st  Century system to ensure uniform collection of sales tax.... Congress has gotten the message and is ready to act. As the industry that employs one out of every four Americans, we are determined to help make this goal become reality.”

And here’s the amazing thing – Amazon supports this bill, even after spending millions of dollars and much lobbying time to defeat previous proposals. Not long ago Amazon temporarily cut loose all their California vendors as a protest against attempts to make the giant e-tailer collect sales tax in the state.

An Amazon spokesman said, “Amazon strongly supports enactment of the (bill) and will work with Congress, retailers, and the states to get this bipartisan legislation passed.”

This reversal from Amazon puzzles me. Why would the world’s largest online retailer willingly give up a tax advantage? Apparently, the justification is in the provision exempting vendors who individually sell less than half a million dollars of goods a year. Amazon likely could continue to avoid collecting sales tax on consumer purchases from these small fry who sell on Amazon’s pages – which sales make up a significant part of Amazon’s overall business.

Whatever the motives, this bill reflects a national change of mood. People have shown themselves willing to pay taxes to support services. National politicians have heard that message.

Many communities this past Tuesday voted in various tax increases. Who knows, maybe we can return to the days when there was music and art in the schools, libraries were open seven days, roads were repaired...

No, don’t wake me up.

I like this dream. I think we have a winner.


Publishers Weekly reports on recent developments... as does Shelf Awareness.

California tax FAQ brought to you by the Board of Equalization...

FURTHER THOUGHTS: However final vote goes, some retailers will be helped by this, some not. There is serious lobbying by trade organizations and corporations large and small  on both sides of this bill. Comments on the InterGoogle are all over the place – from thinking it’s an unalloyed good thing, as I do, to believing it’s an attempt to kill the largest online retailers or at least to curtail their success.

One commenter points out that Amazon could neutralize the effect of sales tax simply by choosing to additionally discount purchases in each state by the exact amount of local sales tax, so that a discounted sold at $50 item with no sales tax would be equal to the same discounted item sold at, say, $47.50 plus local sales tax, or $50. We shall see...

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