News In Brief: Governor Vetoes Bill Requiring Online Book Companies to Tax

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Unphased by pressure from Cody's Books and other independent booksellers, the governor vetoed a bill yesterday that would have required Internet-run book companies to collect sales tax.

Gov. Gray Davis killed the bill in order to protect California's young dot-com economy in the face of complaints that and other companies are sinking local businesses with their low prices.

"In order for the Internet to reach its full potential as a marketing medium and job creator it must be given time to mature," Davis said in a statement. "Imposing sales taxes on Internet transactions at this point in its young life would send the wrong signal about California's international role as the incubator of the dot-com community."

The bill, which would only apply to companies that do business in the state, would have only enforced existing tax law, said State Assemblymember Carlo Migden, D-San Francisco, who sponsored the bill.

A state board on tax policy actually has the power to close the "loop hole" that allows Internet companies to "skirt their duty" to collect taxes, said Alan Lofaso, a consultant to Migden. If the board does not take action, Migden will reintroduce the bill next year.

"The governor's statement makes it clear that he either hasn't read the text of the bill, doesn't understand the issue, or doesn't care about the specifics of the bill and is simply posturing to show support to his wealthy supporters in Silicon Valley," said Andy Ross, who owns Cody's and originally proposed the bill. "By condoning tax evasion, the governor invites other companies to show disrespect for the law."

Ross said and some other Internet businesses collect sales tax anyway, and that the bill would have leveled the playing field by making all companies charge the same tax.



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