As states look for additional sources of revenue, California is the latest to consider taxing out-of-state retailers—including e-merchants—as a way to weather tough economic times.
Assembly Bill 178, which will be heard in committee April 13, would require out-of-state companies to collect and remit taxes if they're doing business with someone in California, even if they don't have a physical location in the state.
For example if a California resident buys a book from Amazon—which doesn't have a physical presence in the state—Amazon would have to collect taxes on that purchase.
A similar law already exists in New York.
If passed, the bill could bring in about $55 million a year for the state. But critics say the bill could turn off merchants, who might go elsewhere to do business.
eBay Partner Network says the bill is unlikely to have a "direct effect" on the auction site. But eBay nevertheless is asking its affiliates to write their representatives to oppose the legislation. Affiliates are Web site operators—such as merchants and bloggers—who receive commissions from eBay for directing buyer traffic to the site.
"We wanted to make sure that we are doing our part to ensure that affiliate marketing remains an opportunity for people to build businesses and livelihoods," the organization's blog notes. "This bill is also being watched closely by other states who are looking at ways to drive more tax revenue, so it could have a cascading effect on the affiliate industry if it were passed."
Brook Schaaf, CEO of Schaaf Consulting, says the bill is too broad, and could affect Google affiliate programs as well as eBay.
A similar bill was introduced in California last year, but didn't pass. Still, California's current economic situation might tip the scales in favor of the bill, notes Beth Kirch, an affiliate leader who is helping organize a statewide campaign against the bill.
Hawaii is considering legislation along the same lines that would specifically tax the sale of music, books and electronics.
Last year, Amazon and Overstock sued the state of New York after officials passed a law that taxed e-merchants, even if they didn't have a brick-and-mortar shop in New York. The companies said the law was unconstitutional, but a judge disagreed and dismissed the case in January. Overstock plans to appeal.
"We don't want to become a tax collector for legislatures," says Jonathan Johnson, president of Overstock.
Auctiva staff writers constantly monitor trends and best practices of those selling on eBay and elsewhere online. They attend relevant training seminars and trade shows and regularly discuss the market with PowerSellers and other market experts.
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