Orange County Business Journal
Though brick-and-mortar retailers have complained that e-commerce companies have an unfair advantage because the state isn’t collecting sales taxes from them, California Board of Equalization Chairman Dean Andal says that’s a bunch of baloney.
“There is no huge revenue loss to the state government. There isn’t now and there won’t be one in the future, no matter how fast the Internet grows,” said Andal. “The uneven playing field isn’t true, either.”
Andal’s comments run contrary to some opinions in Sacramento. A key assemblywoman has proposed a bill to tighten up on tax collections on Internet sales. She says some Internet-based companies are not collecting sales taxes and it’s not fair to Main Street retailers.
A recent state legislative analysis predicted that the Internet could cause a decline of as much as 4 percent in the revenue stream from sales taxes, and some local government officials are worried. However, Andal said, sales-tax revenue increased 9.3 percent in fiscal 1999 over fiscal 1998.
“We have more Internet users than anywhere in the world. You’d think that if there were a revenue loss of any kind, it would show up here. In fact, the opposite has happened,” he said. “Last year was the highest rate of increase in our state’s history.”
Andal made his comments before a recent speech at the Doubletree Hotel in Irvine.
Andal, one of two Republicans on the five-member Board of Equalization, has long been known as an anti-tax crusader. He is also a member of the U.S. Advisory Commission on Electronic Commerce, which recently advised Congress on how it should proceed in issues regarding taxation and the Internet.
The commission gave four recommendations, two of which Andal expects to be approved this year: elimination of the 3 percent telecommunications excise tax and extension of the moratorium on new Internet taxes.
In California, the Internet is not causing a revenue decline, he said, because half of the Internet transactions are plane tickets and stock orders, which are not subject to sales taxes, and about 40 percent of the Internet transactions are business-to-business, so the buyer must collect the user tax.
“When we audit businesses and if they haven’t paid a use tax, we make them pay. We don’t miss that, and it’s often not mentioned by advocates of higher taxes,” he said.
Out of the remaining 10 percent of Internet sales, the big-ticket items like vehicles, boats and even planes must pay a user tax.
Assemblywoman Carol Migden, D-San Francisco, chairwoman of the Assembly Committee on Appropriations, is sponsoring AB 2412, which would tighten the law on Internet companies that must collect sales taxes. But Andal said Migden “is wrong.”
“Migden’s bill solves a problem that doesn’t exist,” said Andal.
