I emailed the members of the Board of Equalization on the editorial in the Book Passage newsletter. I received this very generous reply from Bill Leonard. It is well-considered and important to read. People are paying attention. Hooray!!
Dear Ms. Edgett:
Thank you for writing me about the Book Passages article about the state’s policy regarding Amazon’s tax liability. One commendable aspect of the article is in pointing out that the sales tax is a regressive tax, and in my opinion, it is a tax that no longer works in today’s economy.
First, I am sorry to disagree with the Book Passages conclusion regarding current law. Our legal staff has determined that having affiliate advertisers does not create a nexus for the purpose of sales tax liability. Moreover, it is widely understood that the Quill Supreme Court decision cited in the article forbids states to tax out of state retailers that do not have nexus because such activity is interstate commerce that the United States Constitution explicitly leaves to Congress to regulate. The size and scope of the business is not a relevant legal factor.
The Board of Equalization has authority to tax only to the extent that statute allows. When we depart from our statutory obligations and tax entities based on criteria other than what the law is, we often get sued, and we lose. We lost a similar case involving Barnes and Noble.com in December. I agreed with the majority of my colleagues on the Board that Barnes and Noble.com had established
The Book Passages article did identify one area where we could improve collections. That is with those
One form of relief for retailers, and one that I am actively talking to legislators about, is to reduce the state sales tax rate. We have long known that the Internet would change how products are delivered to consumers and the obvious challenge traditional retailer would face. The state sales tax once reflected the state’s desire to tax consumption. We have since evolved into more of a service-oriented economy but only retailers now bear the brunt of our policy to tax consumption. The number of retailers operating in
When I was in the legislature, I proposed a gradual sales tax phase-out in Assembly Bill 2367 (2000) that would have led to the elimination of the state sales tax rate over time, leaving only the local component of the sales tax – about 2%. This would have the effect of eliminating the competitive advantage Internet sellers have while maintaining a revenue stream for local public safety funds. It would also make clear on the local level the connection between taxes that are paid and the services that are provided so that voters have a better idea how their taxes are connected to the services provided to them.
In short, the article is not correct that the BoE can, via fiat, make a change in tax policy as suggested. I am sympathetic to the plight of retailers and I am working to create a better environment in
Thank you again for writing me and please continue contacting me on matters of State.