California Senate Passes Bill Clarifying Online Sales Tax Law

On May 8, by a 23 to 15 vote, the California State Senate passed Senate Bill 103, which would clarify existing California sales tax laws and require retailers with bricks-and-mortar stores or warehouses in California to charge sales tax for purchases made online by California residents. The bill, S.B. 103, was introduced by Senator Deirdre Alpert (D-San Diego) in late January. The bill now goes to the State Assembly.

S.B. 103 would require an out-of-state retailer to collect tax on sales to California customers if it has representatives operating in the state who repair or service property bought from the retailer; it has an ownership interest in a California business; or it sells the same products under the same name as the California business.

"Taxes have always been owed every time a Californian buys a sweater or a book from an out-of-state retailer. It's time to set the record straight," said Senator Alpert. "Those who claim to be out-of-state remote sellers but who are, in reality, California businesses must collect tax just like every retailer on Main Street." (For a previous article on S.B. 103, click here.)

The Senate's action comes on the heels of the April 23 vote by the State Board of Equalization, California's elected state tax commission, directing its staff tax auditors to conduct a full-scale nexus audit of the California activities of Barnesandnoble.com, a "dot com" retailer which both sells Barnes & Noble products online and used Barnes & Noble stores in California to distribute discount coupons in 1999. The Board also directed Barnesandnoble.com to cooperate fully with the nexus audit. (For an article on this topic, click here.) --Dave Grogan