Bookstores to Online Merchants: Charge Tax





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On Gov. Gray Davis' desk lies a bill, pushed forward by a Berkeley bookstore and passed by the state legislature Wednesday, that would require Internet businesses in California to charge sales tax to customers.

The bill, introduced by Assembly members Dion Aroner, D-Berkeley, and Carole Migden, D-San Francisco, is intended to "level the playing field" for independent book sellers who feel they are at a "dramatic" disadvantage because they must collect state sales tax while e-commerce retailers do not, said Andy Ross, owner of Cody's Books.

Ross presented Aroner with the idea for a bill that would, he said, clarify the existing state law requiring businesses in California to collect sales tax.

Ross and 300 members of the Northern California Independent Booksellers Association contend that Internet companies like Barnesandnoble.com, Borders.com and Gateway.com conduct business in California without charging sales tax to purchasers.

"We saw these competitors that, in fact, are physically present in California, unfairly and blatantly breaking (state) law by selling their products without sales tax," Ross said.

Barnesandnoble.com and Borders.com could not be reached for comment.

Before meeting with the Assembly members, Ross and others filed complaints with the state board in charge of enforcing the sales tax. Ross said that although they bombarded the board with evidence showing that Internet companies are not complying with state law, the board was reluctant to investigate any further.

"This bill is not about taxing the Internet," Ross said. "It's about tax equity."

Davis has not declared his position on the Internet tax bill, but a spokesperson said he generally has opposed taxing Internet companies.

"(The governor's) general feeling is that the Internet has provided explosive economic growth (for California) and he wants to see that industry formally established," said spokesperson Roger Salazar.

Ross and his supporters disagree.

"That's a silly argument," said Ross. "Cody's books also contributes to the growing economy by hiring employees and paying state sales tax. It's not the governor's job to pick winners and losers. That should be left up for consumers."

He added that Davis needs to understand that the bill is about applying the same laws to everybody.

But Chris Shultz, a spokesperson for the American Electronics Association, which lobbied against the bill, said it is unconstitutional. According to Schultz, California cannot require a business outside of the state to collect the state's sales tax.

He added that a store business like Barnes and Noble in California is legally considered separate from a dot-com business with a similar name but with headquarters in a different state. Therefore the state cannot demand sales tax of the Internet business.

Shultz also said that requiring California Internet businesses to collect sales tax would put them at a disadvantage with other states' Internet businesses that are not required to charge sales tax.

The governor will decide on the bill before Sept. 30.

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