Sales Tax Fairness: Two States Move Forward, Two Step Back

The past week has been an extremely busy one on the sales tax fairness front. While California and Louisiana moved sales tax fairness bills forward in their respective legislatures, in Texas, Gov. Rick Perry vetoed legislation that would have required Amazon.com to collect and remit state sales tax. Meanwhile, South Carolina’s legislature blinked in its showdown with Amazon.com, and ultimately provided the out-of-state retailer with a five-year sales tax exemption, with one caveat.

California

This week, the California state Assembly passed two bills that would require remote retailers with a presence in the state to collect and remit sales tax. AB 153, introduced by Assembly Member Nancy Skinner (D-Berkeley), passed Wednesday on a party-line vote of 44-11, as reported by the Associated Press [1]. In addition, AB 155, introduced by Assembly Member Charles Calderon (D-Whittier), would clarify sales tax laws so that remote retailers with related companies located in California would be required to collect and remit sales tax. Calderon’s bill passed by a vote of 47 -16. Last month, the Senate passed a sales tax fairness bill sponsored by Sen. Lori Hancock (D-Berkeley), which is to be taken up by the Assembly.

“This week, we made great steps forward in California, and the strides we’ve made there are due in large part to the tireless work of indie booksellers in the state, especially members of the Southern California Independent Booksellers Association, and the Northern California Independent Booksellers Association and its executive director, Hut Landon,” said ABA CEO Oren Teicher. “Of course, there is still a long way to go. We are asking our member bookstores in California to continue to contact their legislators today and Governor Jerry Brown and to tell them that the time for sales tax fairness in California is now.”

It is estimated that remote retailers owe some $1.1 billion in unpaid sales taxes, according to the San Francisco Chronicle [2]. The Chronicle also heard from one of Amazon.com's online affiliates, who told the newspaper: “As one of Amazon’s 10,000 CA associates, I’ve made $50 in three years. Will gladly give that up for $1.145 billion in taxes for CA.”

The Assembly bills now head for the Senate.

Louisiana

In late May, the Louisiana House Ways & Means committee unanimously approved HB 544 (now HB 641), legislation that would require remote retailers in the state with online affiliates to collect and remit sales tax for orders made by Louisiana residents. The bill now moves to the House.

At a hearing on the bill before the House Ways and Means Committee on Tuesday, May 17, Tom Lowenburg of Octavia Books [3]in New Orleans spoke in support of the bill, as did a number of other retailers from the area. On Monday, May 23, after another hearing, the committee approved the bill.

As reported by New Orleans City Business [4], Henri Louapre, chairman of the board for New Orleans-based Loubat Equipment Co., a distributor of commercial restaurant equipment and supplies, said an average small to mid-size restaurant must purchase up to $150,000 of equipment to open. “Imagine being able to purchase all of this equipment without paying the nine-percent sales tax ($13,500),” Louapre said. “Now try to imagine as a local business trying to compete against that disadvantage. It is not easy to do.”

David Guidry of Lakeside Cameria in Metairie and Mandeville told NO City Business, “The sales/use tax inequity is the single biggest impediment to the growth and sustainability of my company.”

The office of Gov. Bobby Jindal has publicly come out against the sales tax fairness measure, New Orleans City Business reported.

South Carolina

On Wednesday, South Carolina legislators did an about-face and overwhelmingly approved a five-year sales tax exemption for Amazon.com after the remote retailer promised to bring 2,000 jobs to the state. The deal was amended by the state senate so that Amazon.com now must include a clause in each purchase confirmation e-mail informing South Carolina customers that they could owe use tax to the state, as reported by the Associated Press [5]. The online giant must also send customers a yearly tally of what they’ve spent, noting that they may owe use tax on their income tax returns.

Gov. Nikki Haley has publicly stated that she opposes the sales-tax exemption and has called the notification to South Carolina customers “meaningless,” the AP reported.

Tennessee

Legislators are still awaiting word from the state attorney general as to whether the state believes that Amazom.com’s proposed warehouses will constitute nexus in the state, thereby requiring the online retailer to collect and remit sales tax in the state.

In mid-May, the chairmen of both the Tennessee Senate and House Finance committees told Amazon.com that they expect the Internet giant to play by the same rules as 30,000 existing Tennessee businesses that collect and remit sales taxes when the online-only company opens distribution facilities in the state. They then urged the state attorney general to weigh in on the matter.

Texas

On May 31, Gov. Rick Perry vetoed HB 2403, legislation that would have required Amazon.com to collect and remit sales tax for purchases made by Texas residents. Amazon.com has a warehouse in the state. However, the exact language of HB 2403 was amended to Senate Bill 1811, a fiscal matters bill that must be passed in special session to fully fund schools and generate revenue to balance the budget.

“We are undeterred by today’s veto because legislation necessary to balance the budget and fully fund schools is likely to pass in a special session,” said Eric Bearse, spokesman for the Alliance for Main Street Fairness. “We remain confident that the governor will sign legislation that will level the playing field for brick-and-mortar businesses that create local jobs, paylocal property taxes, and collect the sales tax. We expect to be victorious.”

In addition, Rep. Elliott Naishtat (D-Austin) is looking for an answer as to whether the legislature has the option of overriding Perry’s veto, as reported by the Houston Chronicle [6]. According to the Chronicle, House Speaker Joe Straus stated it was unclear what options the legislature has following the veto of legislation.

Perry vetoed the bill over “serious concerns about the impact and appropriateness” of the bill, the Chronicle article noted. “My strong preference is to conduct a thorough policy discussion with Texas lawmakers, consumers, retailers, and technology experts — and with other states and even the federal government — about interstate commerce and the structure of state sales taxes in the 21^st century.”