Online Tax Bills Advance in California

The push for an Internet sales tax is making progress in California, where a state Senate committee this week approved two bills paving the way for collections on goods sold by out-of-state merchants via the Web.

California officials, looking at a state budget shortfall of $35 billion over the next 15 months, have estimated that the state could find about $1.75 billion in annual tax revenue that currently is being lost.

In fact, pressure is mounting across the nation for tax collections on Internet sales. Some major online retailers already have begun to collect sales taxes.

“As the popularity of Internet sales grows, the potential for losses also grows,” said Stephanie Wyant, a spokeswoman for the Pennsylvania Revenue Department, which estimated that state is losing $125 million a year. Other legislative action is pending in states such as Oklahoma, and Massachusetts just joined a multistate collaborative looking for a better way for states to collect taxes on Internet sales.

Sales taxes, of course, are the Net’s new fighting words, and more than a few consumers and e-commerce operations have expressed concern that if and when such taxes are imposed, online sales will be seriously hurt.

In California, the first bill approved by the committee would require California to join the group of states and the District of Columbia working to simplify tax rates and help states tax remote sellers, including those that operate online and via mail-order.

The second bill would require retailers with “bricks and mortar” locations in California to collect state sales tax on Internet transactions with California customers through their online subsidiaries and partners.

California state Sen. Debra Bowen, a Democrat, said in a statement that the current tax system there gives every out-of-state business an instant 7.25 to 8.5 percent price advantage over California-based retailers who collect sales tax at the point of sale.

The national Streamlined Sales Tax Project, ratified in November 2002, requires participating states to bring their state and local sales tax laws into conformity with the goal of reducing the number of sales tax rates per state, making it so that technology (software) can deal with sales taxes for products sold online.

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