The California State Assembly last week narrowly approved legislation that would require electronic marketers with a physical presence in the state to collect taxes on all sales, regardless of where the buyer is located or how the order is made.
Electronic marketers are exempt if they use a California-based Internet service provider.
Roscoe P. Starek III, Direct Marketing Association’s senior vice president catalog issues, said this proposal legislation appears to violate federal law imposing a moratorium on new state and local Internet taxes and existing court rulings that exempt marketers from collecting taxes from customers in states where the marketers do not have a physical presence.
The vote to send the bill (AB 4212) to the Senate was 41-36 with nine abstentions. It faces tough sledding in the Senate.
The bill was sponsored by Assemblywomen Carole Migden and Dion Aroner. Noting that some California e-tailers collect taxes on their sales while others do not, they said in a joint statement that the legislation clarifies the situation by making sure the sales tax law is applied equally to brick-and-mortar, mail-order and Internet sales.
Migden said the legislation was merely an attempt to clarify what should be current practice in California.
In 1992 the U.S. Supreme Court ruled that states could only tax mail order sales of companies maintaining a substantial physical presence within their borders.
