SACRAMENTO (CBS SF) – The spending plan approved Wednesday by Democrats requires companies to collect the state sales tax on online purchases made by California residents.

“This is not a tax. This is a bill to prevent tax evasion,” said Democratic Assemblyman Charles Calderon.

Most consumers do not bother to declare online purchases when they file a California tax return as state law already requires. The Internet sales tax provision of the new budget bill could generate an estimated $200 million annually.

KCBS’ Anna Duckworth Reports:

By some estimates, California loses as much as $1.1 billion a year in uncollected taxes from online and use sales, an amount that also includes physical purchases of goods made in other states by California residents.

Large online retailers such as and have resisted efforts to collect and remit state sales taxes based on the location of distribution centers and affiliates.

To avoid having to collect the sales tax in other states, Amazon threatened to close its warehouse in Texas and cut off marketing affiliates in Illinois and North Carolina. The company also sued New York claiming a similar law there is unconstitutional.

Earlier this month, Amazon severed ties with website affiliates in Connecticut after the governor signed into law a state tax on online purchases that is expected to raise $9.4 million.

Republican opponents of an Internet sales tax in California said the state cannot afford tactics that could put small businesses that affiliate with large online retail sites out of business.

“You cannot continue to raise taxes on business and expect them to continue to employ people in this state,” said Republican Assemblymember Shannon Grove.

(Copyright 2011 by CBS San Francisco. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. Wire services may have contributed to this report.)

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