This week, the Northern California Independent Booksellers Association (NCIBA) and the California Tax Reform Association (CTRA) urged the state's publicly elected tax board to begin collecting sales tax for online purchases from retailers that have nexus in the state of California. In written comments submitted to the California Board of Equalization (BOE) for inclusion in its "interested parties" meeting regarding the state's "tax gap," NCIBA and CTRA called for the board to "examine the failure to appropriately apply nexus rules" and recommended that the state participate in the Streamlined Sales and Use Tax Agreement, an inter-state initiative that simplifies sales taxes and promotes the equal tax treatment between local merchants and remote sellers. The interested parties meeting was held in Culver City, California, on July 30, and in Sacramento on July 31.
The BOE convened the meetings to discuss its recent publication, "Addressing the Tax Gap," which examines the reasons for the gap between taxes owed and taxes paid, and how BOE would work to solve this dilemma and reduce the gap.
The report identifies remote sales as the biggest issue facing California, specifically because of "use tax" liabilities, which arise when taxable items are purchased for use in California and the sales tax is not collected by the seller and the purchaser does not pay a "use tax" on his or her state tax return. The BOE estimates that use tax liabilities amount to $1.2 billion in unpaid taxes.
The plan to reduce the gap "involves identifying areas of non-compliance, and then using both new and traditional approaches to address those areas." The report concludes that "leveling the playing field by improving sales and use tax compliance will insure that California retailers are not at a competitive disadvantage compared to out-of-state retailers."
After the document was released, some in the California business community voiced their objection to the report, and the two meetings were called.
NCIBA urged BOE to collect sales tax from retailers who have nexus in the state of California. "We appreciate the efforts of BOE and your success in the courts in the Borders case, which definitely put an end to the then-budding but now abandoned effort of companies with nexus in California to establish a "separate" entity ... for their Internet sales," said the statement from NCIBA Executive Director Hut Landon and CTRA's Lenny Goldberg. "However, Borders has successfully evaded the court decision and the BOE by referring online sales to Amazon, with no enforcement by the BOE.
"More significantly, large remote third-party sellers have extensive agents, representatives, solicitors, and independent contractors ... (as Borders is for Amazon) through substantial affiliate and referral programs.... We believe that a substantial percentage of the remote sales losses can be diminished by aggressive enforcement of nexus rules with regard to such solicitations of sales."
NCIBA and CTRA also called on California to comply with the Streamlined Sales and Use Tax Agreement. "The intent of SSUTA is remote enforcement, and it has received substantial participation from the business community with regard to simplifying interstate enforcement.... The Board should re-examine its reluctance to participate, and should urge legislative action to bring California into conformity with SSUTA." --David Grogan