California lawmakers thought they were targeting Amazon.com, the out-of-state giant, when they voted last week to force Internet retailers to collect sales tax.

It turns out eBay Inc., California’s own golden child of e-commerce, isn’t so thrilled about it, either.

The San Jose online auction company says the legislation would hurt its business model, which relies on thousands of entrepreneurs who sell goods on its site.

The intent may have been to go after Amazon, but “we’re literally caught in the crossfire,” said David London, senior director for state government relations at eBay.

California Democrats are about to initiate a big effort to ram through bills that would force out-of-state, online-only retailers with no physical presence in the state to collect and remit to California sales/use taxes. Starting with a press conference today, they are pursuing three different approaches.

The first is Assemblywoman Nancy Skinner’s AB 153, otherwise know as the affiliate nexus approach. As previously reported, the bill would force out-of-state online-only retailers who use websites based in the state– including eBay– to advertise to collect and remit California sales and use taxes.  Amazon and Overstock have threatened to terminate affiliate contracts to keep themselves out of California’s tax net if this bill passes.

The second, deeply problematic bill is SB 234 which enacts “long arm” nexus and allows the Board of Equalization (BoE) a virtual unfettered ability to force anyone it wants, no matter who or where they are, to collect and remit to California sales and use taxes. Critics charge that in addition to enabling tax-hiking and the imposition of new taxes, and extending massive authority to the BoE, if this bill becomes law, it will provoke costly litigation that California is likely to lose.

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Big Government has previously covered efforts led by California liberals, including Assemblywoman Nancy Skinner, to force out-of-state, online-only retailers with no physical presence in California to collect and remit California sales tax where they sell into the state, based purely on them advertising with or enabling their store to be accessed via an independent website based in California.  Such efforts are likely unconstitutional.  The most prominent example of such a website would be eBay, the Internet auction giant.

Unsurprisingly, eBay has not been enamored with such efforts which would hit eBay sellers, and has been seeking to work into legislation a threshold designed to ensure that at least some of its out-of-state sellers will not be subject to California sales/use tax collection and remittance obligations where they sell to customers in the Golden State (California-based sellers who sell to Californians are already on the hook).

A possible threshold of $10,000 a year or less in sales to Californians has been reported, but sources say that eBay and/or some of its sellers want that limit raised higher– potentially up to $2 million per year.

EBay has its California sellers engaged in a grassroots lobbying effort aimed at forcing amendments to the legislation, which would defang it.  No doubt eBay sellers located outside of California, who are currently not obliged to collect and remit sales tax on purchases made by Californians, are ecstatic about this. California-based sellers would not benefit from building in a sales threshold, though, especially a high one that could tilt the eBay marketplace distinctly to the advantage of out-of-state sellers. However, their legislators are being urged to make amendments that, if put through, could seriously reduce the already rather pitiful revenues that backers of the legislation claim they would obtain by ramming it through.

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Capitol Confidential has previously reported on legislation introduced by California Democratic Assemblywoman Nancy Skinner that seeks to impose a new, and unconstitutional, tax on out-of-state, online retailers including (ironically) a number of eBay users.  Capitol Confidential has since learned that a prominent corporate sponsor of such efforts is retail giant Target, and that a number of other big retailers back the legislation, too.  According to one source, that group includes Bloomingdale’s.

So what if neither Target nor Bloomingdale’s collected and remitted sales/use taxes in states where they sell online to customers but in which they maintain no physical presence (the practice Skinner’s bill aims to ban by redefining the concept of “nexus”)?  Based on what appears on both companies’ websites when one inputs an order using the data of a resident of such states, it appears both corporations are willingly taking advantage of the same constitutional case law as the online retailers targeted by Skinner’s legislation to avoid tax liability.

Here is a screenshot of the “review” page related to a Target transaction input using a Vermont customer’s information. Target’s website indicates that there are no Target stores in Vermont, and this is the final page at which customers can make adjustments, or discard the transaction:

No sales or use tax appears as a line item in the transaction, and the asterisk next to the $0.00 figure merely points to a line saying “why has sales tax been applied?” (which in this case, it has not).

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Last week, Capitol Confidential reported on a new scheme being pursued by California Democrats to force out-of-state, online retailers to collect and remit California sales taxes.

But in a new development, it is now being reported that the proposal has attracted support from Republican State Sen. Roy Ashburn, making it technically bipartisan.

In addition, while proponents have been arguing that if pursued, this tax maneuver will not hurt smaller, online retailers, Capitol Confidential has learned that the preferred language of some movers and shakers in fact fails to exempt smaller retailers and would draw a surprising category of those selling to consumers online into the California sales tax net: Out-of-state small and medium-sized businesses that market through eBay.

Those familiar with one proposal floated this week say it would exempt from the requirement to collect and pay out California sales tax retailers who advertise with or market through California-based websites and who have not sold $10,000 or more worth of goods in aggregate to Californians during the prior 12 months.

However, even in a rough economy, experts say many small businesses who sell through California-based eBay could exceed that threshold.

If that is correct, such individuals speculate that it could hurt eBay, a big employer in the state, in addition to about 25,000 small online advertising businesses who carry ads by the likes of Amazon.com and Overstock.com.

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