The California Assembly Committee on Revenue & Taxation will hold a hearing today on Assembly Bill 178, CA's version of the Amazon tax bill.

 

Proponents of this legislation contend that AB 178 will make California retailers more competitive. While this is a laudable goal, the unintended effects of AB 178 would yield the opposite result, increasing the competitive disadvantage had by California businesses and raising the already high burden borne by Golden State taxpayers in the process.

 

AB 178 expands the definition of “doing business” in the state to include any retailer that, while based out of state, advertises on a California-based website using a click-thru banner ad or other link. This nexus would require out of state retailers that have no physical presence in the Golden State to pay California's highest in nation sales tax.

 

If advertising with California-based websites were to create a nexus in the state for out of state retailers, those retailers will simply chose to terminate click-thru advertising agreements with California-based websites. Why would they not? Retailers can gain the exact same access to California’s consumer base with click-thru ads and other promotional links on websites based outside California. AB 178 would give them incentive to do so.

 

When New York passed a law similar to AB 178 last year, Overstock.com suspended all contracts with such online advertisers in New York. Likewise, AB 178 will eliminate an important source of revenue, which income tax is paid on, for many online entrepreneurs and other California-based organizations.

 

To express your opposition to AB 178, contact the Assembly Committee on Revenue & Taxation.