Home / taxation

California Studies New Affiliate Tax

The state of California is again studying the implementation of a tax on sales of goods or services at Amazon.com and other affiliate programs. A similar measure passed by the state house and senate was vetoed by Governor Arnold Schwarzenegger in the autumn of 2009.

As it stands today, California residents are supposed to declare the value of all online purchases. The effect of this legislation transfers responsibility for paying taxes on online purchases from consumer to seller. Naturally, online merchants are reluctant to visibly increase prices by 8.25%. Affiliate programs are also reluctant to assume the costs of calculating, tracing and paying sales taxes in differing jurisdictions.

Facing an estimated $20Billion budgetary deficit, the state government is believes it can reap over $175million from a California affiliate tax. Unfortunately, the state legislators might not have thought this plan fully through.

The introduction of similar taxation programs by other state governments have resulted in affiliate networks abandoning those states. When affiliate programs leave a state, they also leave all affiliate marketers in that state. Ultimately, the effect of affiliate taxation tends to be a reduction of realized revenues as the state loses taxes on the incomes of those affiliates.

Recently, a coordinated effort in Colorado led to the alteration of a tax on online sales to exempt affiliates. WebmasterRadio.FM will watch the California situation and inform readers and listeners on how they can participate in opposing California’s latest efforts to impose such a tax.

AB178, California Affiliate Tax Bill Dead (for now)

Debate over a California bill that would apply state taxes to sales of merchandise over the Internet has been put off until next year by the Assembly Revenue and Tax Committee. The bill, AB178 did not receive a hearing at yesterday’s meeting of the Committee thus pushing it to the back of a long list of other taxation bills for the Committee to examine.

The temporary shelving of AB178 is seen as a small victory for e-commerce businesses and affiliates who worked hard to lobby against passage. The California decision to put off debate on AB178 comes two weeks after a similar bill in Maryland, (Senate Bill 1071) was also allowed to be shelved without debate. Similar bills have also recently been defeated in Hawaii and Virginia.

While AB178 is unlikely to become Californian law in 2009, opponents warn that the bill might make a comeback in 2010 or be used as a negotiation chip in 11th hour negotiations during debate over the regular budgetary deadlocks that befall California. The California Board of Equalization estimates taxation of online sales could bring almost $150million into state coffers annually.

The California Assembly Committee on Revenue and Taxation published its analysis of AB178 before yesterday’s hearing. The analysis gives a good overview of the purpose of the bill and includes information from supporters and opponents. It also includes a list of supporters and opponents.

State taxation of online sales will be a session at the upcoming Affiliate Convention in Denver, June 17 – 20.