[STORE LETTERHEAD]

The Honorable [REP/SEN. FULL NAME]
[FULL ADDRESS]

[DATE]

Dear [Mr./Ms.][Senator]:

As an independent bookseller based in [CITY], California, I am urging you to support the Internet sales tax provision in the proposed California State Budget. This provision would clarify state laws to require non-California merchants with an affiliate network in the state to collect sales tax on purchases shipped into California. It would play a significant role in leveling the playing field for California businesses and help secure needed revenue to support essential local services.

Independent booksellers in California realize approximately $243 million annually in sales, operate 257 locations in 141 cities and towns, employ approximately 2,650 people, have an estimated payroll approaching $42 million, collect more than $17.6 million in sales tax, and recycle an overwhelmingly larger share of their revenue back into the local economy than out-of-state online retailers, according to the Northern California Independent Booksellers Association, the Southern California Independent Booksellers, Association, and the American Booksellers Association.

However, every year, California is losing tens of millions of dollars in sales tax revenue to online retailers, many of which have nexus in the states due to affiliate relationships. According to a recently published University of Tennessee study, State and Local Government Sales Tax Revenue Losses From Electronic Commerce, in 2008, the total state and local sales and use tax revenue loss resulting from failure to collect current taxes on e-commerce sales in California was $1.3 billion in 2008. As online shopping continues its robust growth, this figure is expected to balloon to $1.9 billion in 2012.

Furthermore, this study stressed that this failure to collect taxes that are due has put local retailers at a competitive disadvantage to e-commerce competitors as "consumers browse on Main Street but then make their purchases online to evade the tax."

Federal law clearly defines nexus as a retail store, warehouse, office, or sales agent. I believe it is indisputable that any out-of-state online retailer that has one or more affiliates based in California -- affiliates that clearly act as solicitors on the online retailer's behalf and earn commissions based on sales -- has nexus in our state. These out-of-state online retailers should therefore be charging sales tax. California booksellers that have e-commerce operations collect and remit sales tax, and so should non-California merchants that have nexus in the state. When the state allows these online retailers to continue their sales tax avoidance practices, California's citizens are the primary losers, as potential tax revenue is uncollected -- monies that fund such essential services as schools and first-responders.

I understand that some affiliate marketers argue that this law will hurt the state's economy by putting them out of business. They fear that the large, out-of-state online retailers who pay them a commission to sell their goods might possibly drop them from their affiliate programs. Obviously, I cannot speak to affiliate marketers' worries. However, in New York State, not only has the New York State Supreme Court thrown out Amazon.com's challenge of the law, Amazon.com also has maintained its network of New York-based affiliates. Additionally, while one out-of-state retailer did drop affiliates, over 30 online companies registered to collect and remit sales tax. According to the New York State Department of Taxation and Finance, in the first six months since their Internet Sales tax provision became law, the state has recouped $46 million, and New York State expects to recoup $68 million in FY 2009 - 2010. The Internet Sales Tax provision may end up saving thousands of New York retailers by allowing them to compete on an even playing field. That in turn is good for the state's long-term fiscal health.

The time for California to act is now. The results of sales tax inequity can be seen in the many empty storefronts on Main Streets throughout California. Sometimes, however, it doesn't result in a store closure, but it in lost sales tax through decreased sales and lost income tax through job cuts. A downturn on Main Street creates a ripple effect that echoes throughout our state's economy. For example, just this week, Redding, California, Police Chief Pete Hansen announced a number of department cuts because the Redding City Council adopted a "lean, two-year budget" as a direct result of sales tax revenue decline. So it's important to understand that when out-of-state retailers with affiliates in our state shirk their responsibility to collect and remit sales tax, it doesn't just affect retailers like me, it hurts the state's entire economy.

The bottom line is, I am simply asking for a level playing field while out-of-state, online giants wish to maintain an unfair competitive advantage. At present, by not enforcing sales tax laws, our state is providing out-of-state retailers with a 9 percent advantage right out of the gate.

Importantly, I am not discussing any new "Internet taxes." I am simply asking you to equitably enforce existing tax laws by supporting the Internet sales tax provision in the California Sate Budget, which clarifies existing sales tax laws to require out-of-state merchants with nexus in the state to collect and remit sales tax on purchases made by state residents.

Sincerely,

[NAME]
[STORE NAME]
[CITY STATE ZIP]
[PHONE NUMBER]
[EMAIL ADDRESS]

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