Maryland Gov. Martin O’Malley last week proposed a budget that would raise taxes by $311 million.

From the Washington Post:

The Democrat outlined a $15.3 billion general fund budget plan that includes about $311 million in new revenue. About $182 million will come from capping income tax deductions and phasing out exemptions.

[...]

The governor’s plan would cap income tax deductions at 90 percent for incomes above $100,000 and 80 percent for incomes above $200,000.

It also would reduce exemptions from $2,400 to $1,200 per person for singles who make between $100,000 and $125,000 and couples who make between $150,000 and $175,000. Exemptions would be eliminated for singles who make more than $125,000 and couples with incomes above $175,000.

[...]

About $19 million will come from aligning the state’s cigarette tax with other tobacco products. Tax on cigars and smokeless tobacco is 15 percent of wholesale, which was comparable to the 36 cents per pack cigarette tax in 1999. The governor’s proposal would make it 66 percent of wholesale, which would make it comparable to the present $2 per pack cigarette tax.

The proposal also would require online sellers to begin collecting sales tax, which the governor projects would raise about $19 million, but there are questions about enforcement.

(more…)

In the latest turn of events relevant to California’s move to force out-of-state, online-only retailers to collect and remit to it California sales taxes– an effort that legal experts say is likely unconstitutional– Golden State liberals are pursuing a new legislative scheme to invalidate a referendum that appears headed to the ballot and which would nix the “Amazon Tax.”

From the Sacramento Bee:

A group of California legislators plans to push a new online sales tax bill in a move to thwart tax opponent Amazon.com.

Lawmakers today used a “gut-and-amend” procedure that takes an existing bill and substitutes an online sales tax measure. The bill passed the Senate Appropriations Committee today.

In late June, Gov. Jerry Brown signed a bill requiring Amazon and other online retailers to begin collecting sales tax on California transactions. The bill passed on a regular, majority vote. Amazon has refused to collect the tax and launched a referendum to have it overturned.

But Larry Levin, a spokesman for Sen. Loni Hancock, D-Oakland, said the new legislation would be different. It would pass on a two-thirds supermajority and would carry an “urgency” clause. That means it can’t be subject to ballot referendum, Levin said.

Backers of the legislation reportedly believe they can get two-thirds of each chamber to vote for the bill in question.  Skeptics however charge that that will be tough in light of Republican numbers in both chambers, and GOP opposition to the “Amazon Tax” already exhibited during previous legislative battles.

Proponents of the tax increase will need to get the support of three GOP members in the Senate and two in the Assembly to clear the two-thirds majority hurdle.

(more…)

California recently instituted as part of its budget solution an “Amazon Tax” aimed at forcing out-of-state, online retailers with no physical presence in the Golden State to collect and remit sales tax in respect of goods sold to Californians where the retailer in question advertises, or maintains an “affiliate” referral relationship, with websites based within state lines.

Prior to passage of the bill obligating collection and remittance in such circumstances, prominent online retailers including Amazon.com and Overstock.com had threatened to terminate relationships with affiliates, if the legislation became law.  Now that it has, and affiliate relationships are being severed, something critics of the legislation say was entirely foreseeable is occurring: Online businesses and entrepreneurs are leaving the state, thus risking an actual reduction, as opposed to marginal increase, in California’s tax revenue.

Last month, news broke of one California-based online entrepreneur who had decided to ditch California and move to Nevada in the aftermath of Gov. Jerry Brown signing the law.  ”I always figured that in California, home to Silicon Valley and a million tech startups, they’d never pass a law like this,” said Nick Loper, who formerly operated ShoesRUs and has now opened a new venture, ShoeSniper.

Per the piece in which Loper is quoted, more than 70 affiliates had at that stage already left California, according to online businesses.

Then, last Thursday, another online entrepreneur, Erica Douglass, posted a mock “It’s Over” letter to California on her blog. Douglass, who sold an internet company she had built for $1.1 million in 2007 when she was just 26, cited multiple reasons for moving to Austin.  Among them were unnecessary paperwork requirements mandated by the state, and high taxes as well as business fees.  However, the straw that broke the camel’s back, was according to Portfolio, Brown signing the Amazon Tax into law.

(more…)

In the aftermath of the California legislature passing and Gov. Jerry Brown signing into law an “Amazon Tax,” it looks like taxpayers unhappy about the Golden State’s pursuit of the almost certainly unconstitutional measure may get an opportunity to kill it off.

According to KQED, this week, a formal request for a referendum to overturn the law was filed in Sacramento.  In order to make it on the ballot, backers will have to get something in the range of 500,000 signatures once the petition is cleared by the state’s Attorney General.  One question that will need to be settled is whether the referendum is allowed in view of the fact that the Amazon Tax was included in the budget, but signs point to this being a possibility.

According to Amazon.com Vice President Paul Misener, “This is a referendum on jobs and investment in California.  As Governor Brown has made clear, it is important to directly involve the citizens of California in key issues and we believe that Californians will want to vote to protect small business and keep jobs in the state.”

If placed on the ballot, the referendum could have a good chance of success.

(more…)

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.

Big Government recently noted that the Texas legislature voted to ram through a California-style tax-hiking “Amazon Tax” bill.

Gov. Rick Perry subsequently vetoed that bill, but Big Government has learned that Texas legislators have renewed their push for policy that is unconstitutional on its face by wrapping their proposal into SB 1, Texas’ fiscal matters bill, which is under consideration by the Texas House.

Texas conservative groups and leaders have been working to get the “Amazon Tax” provisions stripped out of that bill.  However, those efforts appear to have been unsuccessful to-date. As the Dallas Morning News reports, House members are persisting in their pursuit of the tax hike.

(more…)

California’s proposal to institute an “Amazon Tax” took another major step forward last week.

The last of three bills aimed at getting the Seattle giant and other out-of-state online retailers to pay sales tax passed the Assembly on Wednesday afternoon.

“It’s something we’ve been working on for years,” said Assemblywoman Nancy Skinner, D-Berkeley, who authored the bill. “But this is the first time that so many businesses up and down the state are supporting it.”

A companion bill, authored by Assemblyman Charles Calderon, D-Whittier (Los Angeles County), passed the full floor on a 47-16 vote on Tuesday.

“This bill levels the playing field for businesses in California,” said Assemblyman Bill Berryhill, R-Ceres (Stanislaus County). “Not a day goes by when I don’t hear from businesses about their ability to compete.”

Which is what supporters of the so-called e-fairness legislation have been shouting from the rooftops for years, despite vetoes from former Gov. Arnold Schwarzenegger and dire threats from Amazon.com (2010 profit: $34 billion) and Utah’s Overstock.com to pull their affiliate business out of the state.

Assemblyman Berryhill was the lone Republican to back the bills; now both AB 153 and 155 will head to the Senate for approval, while Senate bill 234, another “Amazon Tax” bill, is anticipated to be taken up by the Assembly.  Democratic Gov. Jerry Brown still hasn’t voiced an opinion either way on any of the bills.

(more…)

Big Government has previously discussed the Texas legislature’s surprising move of passing legislation aimed at forcing out-of-state, online only retailers to collect and remit to the state sales/use tax.

Such legislation is constitutionally dubious, and sources say, may well be vetoed by Gov. Rick Perry for multiple reasons.  First, opponents say the bill would increase taxes to the tune of $60-plus million a year.  Second, it appears unlikely to pass constitutional muster.

But third, other red states like South Carolina and Tennessee that are keen to attract and retain business appear to be rejecting similar moves, thus potentially marginalizing the Lone Star state should H.B. 2403– the bill in question– be allowed to become law.

From CNBC:

The House voted 97-20 to give Amazon a five-year exemption from collecting sales taxes from online shoppers in South Carolina.

From the Houston Chronicle:

Tennessee lawmakers on Wednesday backed off trying to force Amazon.com to collect sales taxes on transactions in the state, at least for this year.

Texas is widely regarded as one of the most business-friendly states in the country, and it has a relatively low unemployment rate of 7.7% to prove it.

(more…)

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.

(more…)

Texas is generally regarded as a conservative state, but you would not guess that based on some of its legislators’ pursuit of a California-style effort to hike taxes by targeting out-of-state, online-only retailers with no physical presence in the state.

Last month, the Texas House passed HB 2403, which attempts to enable the Texas Department of Revenue to force such companies to collect and remit to Texas sales/use tax on goods sold to Texas customers in broad circumstances.  Friday, that bill was also passed by the Texas Senate.

This is despite the fact that the Supreme Court’s decision in Quill Corp v North Dakota clearly establishes that a state cannot require this, given the content of the US Constitution’s Commerce clause, unless a corporation is physically present in the state.

That leads experts to say that what HB 2403 seeks to do is very likely unconstitutional, and if it becomes law, it will likely provoke a constitutional challenge that will cost the state of Texas a great deal of time and money to litigate.

(more…)

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.

(more…)

As California Democrats continue to press for an unconstitutional new tax scheme targeting out-of-state, online retailers, it has emerged that an additional two retailers alleged to be backing the effort themselves decline to collect and remit tax on Internet sales made to customers resident in states in which those retailers maintain no physical presence.

Recently, Capitol Confidential reported on what was described by critics as hypocritical behavior on the part of retail powerhouses Target and Bloomingdale’s.  Now, research indicates that Macy’s and Saks Fifth Avenue—both alleged to be lower-profile backers of the so-called “Amazon tax” proposal and both competitors of Overtsock.com, itself a major target of the legislation—engage in the same behavior.

The below screenshot shows an online purchase initiated at Macy’s website by a customer in Nebraska, a state in which Macy’s maintains no physical presence.  The relevant webpage indicates that Macy’s intends to collect and remit no Nebraska sales tax on the transaction.

Meanwhile, this Saks purchase initiated using a zip-code for Arkansas—a state in which Saks has no stores—likewise indicates that Saks intends to collect and remit no Arkansas sales tax on the transaction.

(more…)

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).

(more…)

Last week, California Democratic Assemblywoman Nancy Skinner announced the introduction of fresh legislation to force out-of-state, online retailers to collect California sales tax– legislation that critics charge amounts to an effort to introduce a new tax in what is arguably already the most heavily-taxed state in the nation.

The move replicates others pursued in years past by Democratic colleagues of Skinner– but notably avoided by Gov. Jerry Brown in his recently announced budget– and by all accounts seems to ignore the overwhelming likelihood that such a scheme would prove unconstitutional if challenged in court (by virtue of the the Quill v. North Dakota decision).

However, Skinner’s legislation is also being challenged on the basis that it would not, contrary to backers’ assertions, help put a substantial dent in the state budget deficit or eliminate or minimize the need for deep budget cuts in order to close it.  In fact, using Skinner’s own numbers, it appears that the institution of a so-called “Amazon tax” would strip away a mere 1.1 percent of California’s budget deficit:

(image via Americans for Tax Reform)

Critics say even the minuscule prospective “help” that might be afforded by the institution of Skinner’s new tax with regard to closing the Golden State’s budget gap may represent a “best-case” scenario: Were the new tax instituted, online retailers could well end their affiliate programs, thereby denying affiliates a revenue stream that enabled them to contribute over $100 million to California’s coffers in 2009.

(more…)

Today, California is set to exceed its own prior record with regard to budget tardiness, as it heads into its 85th day without a budget.

Legislative leaders flew to Los Angeles Wednesday to meet with an ailing Arnold Schwarzenegger, who places blame for the impasse with the Legislature, whose Democrats have a budget proposal of their own—one packed with tax hikes.

Here are just some of the increases the Democrats are seeking:

• A $1.8 billion middle-class tax increase focused on personal income taxes and car tax to be accomplished via a “tax swap”;

• A $1.2 billion business tax hike to be accomplished via the delay in use of business Net Operating Loss deductions and “Carryback” provisions;

• An $842 million tax increase on oil production.

California Democrats are also reportedly looking to incorporate a provision into the budget whereby out-of-state, online retailers who advertise with websites based in the state would be forced to collect and remit California sales tax.  This is despite their prior attempt at getting such legislation passed– which some experts say could have been done more simply outside of the budget– having failed, and despite such a tax plan being unconstitutional.

(more…)

It’s ba-ack!  Facing a $20 billion budget gap, California liberals in the state legislature are reviving a tax-hike plan targeting out-of-state, online retailers that has a diverse coalition of web entrepreneurs and business and political leaders fuming.

The proposal, mentioned during a California Senate hearing just last week, would force companies like Overstock.com to collect and remit to the Golden State sales tax where they advertise with California-based websites.

Supporters say it could add needed revenue to the Golden State’s coffers.

Opponents charge that deeming such out-of-state retailers to have “sales tax nexus” by virtue of advertising in the state would constitute a major tax hike that would worsen the state’s budget woes.

Furthermore, several prominent critics of the proposal contend that it could be unconstitutional.

(more…)