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 [1].)

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 [2].) --Dave Grogan [3]