California’s Internet Taxation Will Kill Internet Advertising
California has a penchant for trying to chase businesses out of the state and it appears they are at it once again. The state of California which is now in debt some $40 Billion dollars because of the ineptness of the legislature to cut anything out of their budget, now wants to punish anyone who has a web page and that advertisers for out of state companies. In essence the proposed legislation known as the ‘Amazon Tax’, would require a web site based in California that advertises an Amazon ad to pay sales tax to the state of California.
The unfortunate part of this legislation is that it will be the web sites that will suffer since they could lose advertising dollars if they decide to pull theirs ads from California based web sites. According to a VentureBeat article it also states that:
Here’s how it would work: If you have a web-based business in California and collect revenue by showing out-of-state companies’ ads on your site, Bill AB178 will claim that both you and the businesses you advertise on your site have residence in California, and are therefore required to pay California sales tax. For example, say your Santa Monica-based web site shows banner ads for Amazon.com. With Bill AB178 in place, Amazon.com would be classified as a California-based business based on the fact that your business draws affiliate advertising sales revenue. Amazon would then be required to collect sales tax on all sales into California. The idea behind the bill is that California could force out-of-state retailers to collect and pay California sales taxes.
Sounds pretty reasonable on paper, but the reality is that a large number of those advertisers will simply refuse to work with California’s small online businesses, resulting in lost business income, lost business tax and a large number of lost jobs — which will add to California’s rising unemployment. This is exactly what happened in New York when they passed a similar bill, nicknamed the “Amazon tax”, last year: roughly 200 advertisers stopped advertising on New York-based web sites that were impacted by the legislation.





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