Out-Of-State Online Retailers Flee California’s New Tax Law

SAN FRANCISCO (CBS SF) – More and more online shopping sites are dropping California merchants as a result of the state’s new requirement that out-of-state retailers collect sales tax from California shoppers.

Amazon.com was seeking a referendum to let California voters decide whether to overturn the new law.

The petition, filed Friday, comes after the requirement was included in a state budget signed in late June. It forces e-tailers to collect California sales taxes by expanding the definition of having a physical presence in the state. The requirement now kicks in if Amazon has a marketing arm or affiliates in the state – individuals and companies that earn commissions by referring visitors to Amazon from their websites

Amazon had thousands of affiliates in California and cut ties with them after the law’s passage.

KCBS’ Mike Colgan Reports:

This is an especially large problem for operators of California websites that provide comparison shopping services.

”A small out-of-state retailer is faced with having to make the choice, if they want to continue doing business with California-based websites like ours, they’ll have to start to begin to collect sales tax, and that is not a trivial factor,” said Rob Smahl with San Francisco-based EBATES.com, which offers coupons and cash rebates for online shopping.

Smahl said they’ve seen their business drop 20 percent in just the last week and a half.

Brick-and-mortar stores have said the online tax makes for a more even playing field.

(Copyright 2011 by CBS San Francisco. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)

More from Mike Colgan
  • wise up

    if we wanted to capture revenue and avoid an outflux of business, it seems like the tax should have been levied on CA residents at the point of purchase, regardless of where the physical presence of the store was. Retailers would then have been forced to comply or abandon the market completely (yeah right!)

    • MK

      CA may tax its residents at the rate of 100% and the state will still be deep in debt. We don’t have revenue problem. We have spending problem.

  • Robert Aloo

    Lower the state sales tax to 3 or 4% and there will be little motivation to shop out of state.

  • http://blin90.wordpress.com/2011/07/12/tax-law/ Tax Law « Ben's Weblog

    […] here. Explore posts in the same categories: […]

  • MK

    Phrase “I told you so” comes to mind…….

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