No More Tax-free Shopping from Online Retailers in California

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Until now, California residents making online purchases had things cheaper as online retailers were not charged sales tax for state residents. But all that is going to change from September 15, and from now on purchases made by California residents on Amazon.com or other online retailers is also going to see an addition of local sales taxes.

The new law is trying to collect more revenue for the state and its people, by the people, and from the people, obviously. It is meant to address the inequitable situation that was there with brick and mortar establishments having to pay sales tax and having to compete against online retailers who did not need to pay local sales tax. By rough estimates, the move can add about $100 million a year to state coffers.

According to industry reports that sparked off the initial debate for the new law demanding taxation of online retailers, individual states are losing about $11.5 billion a year they could have charged residents, had they been making purchases from brick and mortar stores. California Congresswoman Jackie Speier (D), of the 12^th Congressional District, told CBS News, “When you’re losing that sales tax revenue, that means it’s affecting your roads, it’s affecting the resources for local government, it’s affecting the resources for education.”

  

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The bottomline of course, is that not being able to collect taxes affects the pockets of politicians and their cronies who get the government contracts for ‘development’ regardless of political allegiance. This is something that needed to be redressed and it has been done. On the other hand, the grievances of brick and mortar establishments were very fair and equitable, as the burden of sales tax on them made them lose their competitive edge and suffer losses.

Is this going to increase the revenue of brick and mortar shops? May be, but that is questionable. Possibly people would continue buying online due to the ease and time saving component and also the facilities that allow to search and compare a large number of products without burning gas or wasting much time. For those purchases, which people like to make from brick and mortar shops, they did that anyway, though after researching online. So, online retailing is not going away, the only difference to the scene made by the new law in California is that online purchases in California would become costlier.

While Amazon and other online retailers already pays such local taxes in seven states of the country, may be the best gain from the California action has been that Amazon has agreed to settle the issue by building two distribution centers in California and adding about 1000 full-time local jobs.