States Wrestle With Online Tax Issue

California pulls 'flawed' proposal, as New York introduces 'cyber shame' bill.

by staff writer
- May 21, 2009

At a time when tax revenue has reached its lowest point in 17 years, New York and California are making headlines because of tax legislation they have in the works.

New York politicians are hoping to embarrass delinquent tax payers into paying their share by posting their names on a "cyber shame" list. Meanwhile, California has taken legislation that would have required online merchants to collect taxes—even if they don't have a physical location in the state—off the table for now.

California stood to make millions if the legislation passed, but the bill known as AB178 was shelved hours before it was to be presented to the Assembly Revenue and Taxation Committee on April 27. Now it won't be heard until at least January 2010.

The bill was "flawed," states online marketing consultant, Lisa Picarille, in a San Francisco Chronicle article. Picarille argues that if out-of-state businesses are forced to collect taxes from their California shoppers, they may opt to do business elsewhere.

In the meantime, New York officials are keeping their eyes on a proposed "cyber shame" bill that would publish on a public Web site the names of the top 250 delinquent individuals and business—both online and off. The aim is to "shame them" into paying, according to officials. Other states, including California, have successfully published similar Web sites, some collecting more than $100 million in a single year. So far this year, California has collected $14 million, according to reports.

New York officials estimate the state could collect roughly $250,000 million in delinquent taxes. New York's Department of Taxation and Finance notes there were more than 400,000 delinquent taxpayers in the state, totaling a combined amount of $2.5 billion in back taxes. More than half of those 439,279 delinquencies occurred during last year.

"Putting delinquents on display will encourage them to pay their debt to hard-working taxpayers," notes Sen. Jeff Klein (D-Bronx/Westchester), who introduced the "cyber shame bill" into the Senate.

The list would come with an amnesty program, which would allow those people who pay the bulk of the taxes they owe to bypass interest and penalties.

"When we in government are asking working families to sacrifice more and more during this difficult economic downturn, we need to first make sure that everyone is already paying their fair share," notes Assemblyman William Colton (D-Brooklyn), another proponent of the New York bill.

About the Author

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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