Sales Tax Fairness Provision Passes in California

In a hard-fought and significant legislative victory, on Wednesday, June 29, Gov. Jerry Brown signed a sales tax fairness provision into law that requires out-of-state retailers to collect sales tax on sales made to California customers. This e-fairness win for independent bookstores and Main Street retailers follows more than a decade of advocacy efforts, which saw sustained opposition and many near-victories. 

The provision, AB 28X, a compilation of three e-fairness bills in a budget trailer bill, now requires the state Board of Equalization to issue rules and regulations that clarify the obligations under existing law for out-of-state retailers to collect and remit tax on sales of tangible personal property to California residents. Sponsors of the sales tax fairness provision believe that AB 28X could bring in an estimated $200 million per year of currently uncollected sales tax.

In response to the signing, Amazon.com announced that it was firing its affiliates in California. However, AB 28X is a broader law than affiliate nexus laws passed in other states and, as such, will require Amazon.com to collect and remit sales tax to the state because of its subsidiaries in the state.

In a statement, Assembly Member Nancy Skinner, sponsor of the affiliate nexus portion of AB 28X, said, “This is a great day for California business. With the signing of e-fairness, California employers are no longer at a competitive disadvantage with out-of-state, online-only companies. Amazon.com and Overstock.com should do the right thing and play by the rules just like our California businesses do. Severing affiliate ties won’t change the fact that under our e-fairness they will still need to collect sales taxes. We hope that Amazon and Overstock rethink these bullying tactics.”

The Northern California Independent Booksellers Association [1] (NCIBA), the Southern California Independent Booksellers Association [2] (SCIBA), the American Booksellers Association [3], and the Alliance for Main Street Fairness [4] (AMSF) hailed the signing.

“Both the NCIBA and SCIBA are delighted that we have finally made substantive progress in this 12-year-long fight,” said Hut Landon, executive director for NCIBA, via e-mail. “The Board of Equalization (BOE) has been given what it has long asked for — language that strengthens the tax code with respect to nexus and sales tax collection. Our next step is to urge the BOE to enforce the new law and demand payment. We understand that the response from Amazon.com will most likely be a lawsuit, but that shouldn’t stop the BOE from doing its duty.”

Oren Teicher, ABA CEO, said, “Gov. Brown’s decision to sign the budget adopted by the legislature is excellent news in our decade-long fight to achieve sales tax equity in California. ABA congratulates NCIBA and SCIBA for their steadfast support in seeing this through, and, in particular, we extend our thanks and congratulations to Hut Landon, NCIBA’s executive director, whose herculean dedication to this effort for years and years has finally paid off.”

Teicher stressed, “With the passage of sales tax equity in California, it is time for Amazon, Overstock, and our other opponents to work with us to get government out of the business of favoring one retailer over another. Even Jeff Bezos acknowledged in an interview a few weeks ago that eventually we do need a solution to this issue. One way to achieve that solution would be for everyone to comply with California’s new law without instituting further litigation.”

Danny Diaz, spokesperson for the Alliance for Main Street Fairness, said, “We applaud the state of California for enacting laws that end special treatment for online-only retailers. This legislation helps close a loophole that until now has put thousands of California businesses at a competitive disadvantage against out-of-state, online-only retailers that have used outdated laws to evade playing by the same rules as other businesses. California — the eighth largest economy in the world — now joins eight other states requiring that all retailers play by the same rules and collect sales taxes. We hope that today’s action sends a message to Washington that it’s time to level the playing field and end special treatment for online-only retailers across the country.” 

Landon said proponents of sales tax equity never expected it to take this long when their campaign started more than a decade ago. “I am saddened by the loss over that time of countless independent retailers that were unable to survive the unfettered growth of online sellers granted sales tax immunity,” he said. “At the same time, I am proud of independent booksellers, both in California and across the country, who refused to let this issue die. In our region, booksellers Andy Ross and Bill Petrocelli put in countless hours researching, strategizing, and advocating, while our guardian angel, Sacramento tax reform guru Lenny Goldberg, provided invaluable guidance and advice as we plunged into the murky waters of California state politics.”

Both Landon and Teicher urged booksellers to thank their legislators and Gov. Brown for passing sales tax fairness, though both warned that an Amazon.com legal challenge could conceivably spur the need for further outreach.