California considers taxing internet retailers, but not ticket brokers

A new bill winding its way through the California State Assembly would add internet retailers to the rolls of taxed merchants, but the measure would likely not include web-based ticket brokers.

The proposed bill, <a “href=http://www.assembly.ca.gov/acs/acsframeset2text.htm” target=”_blank”>AB 178, would amend the state’s tax code to add internet businesses, a move that could generate millions of dollars in additional sales tax revenue for the cash-strapped state. Currently, California’s statewide sales tax is 8.25 percent.

“This bill would include in the definition of a ‘retailer engaging in business in this state’ a retailer entering into an agreement with a resident of this state under which the resident, for a commission or other consideration, directly or indirectly refers potential customers, whether by a link or an Internet Web site or otherwise, to the retailer, if the cumulative gross receipts or sales price from sales by the retailer to customers in this state who are referred pursuant to these agreements is in excess of $10,000 during the preceding 4 calendar quarterly periods, except as specified,” the bill states.

California, like several other states including New York, has suffered from plunging revenues due to the current recession. In addition, politicians from around the country have been grappling with the issue of taxing internet sales for years.

However, according to the office of the California bill’s sponsor, Democratic Assemblymember Nancy Skinner, event tickets would not fall under the tax and neither would ticket brokers.

Hawaii and Maryland are currently considering similar internet legislation, and about 20 other states are already gobbling up the added revenue or also considering it. But, the move has also been criticized because collecting the revenue can be difficult and costly, almost negating the benefits.

“For example, if you buy a book from Amazon.com, you don’t pay a sales tax because Amazon doesn’t have any physical presence in Maryland,” Maryland State Sen. Richard Madaleno told WBAL-TV. “If you buy from BarnesandNoble.com, you pay a sales tax because Barnes and Noble has book stores in Maryland, and therefore we can charge the tax to them. So, we are just trying to say as the Internet commerce has grown, we have now developed a system that is unfair.”