Tax out-of-state online retailers

Jaime Chong/Staff

We all know Berkeley loves to read. In fact, according to a recent report, Berkeley is the third-most well-read city in the nation.

Despite our love of the written word, Berkeley, along with many other cities throughout California, has witnessed our cherished local bookstores vanish right before our eyes as a direct result of online retailers exploiting a legal loophole to avoid collecting sales taxes from consumers.

It is important to be clear; there is not now, nor has there ever been, a sales tax exemption for Internet sales. However, many Californians are unaware that online purchases are subject to the state’s sales tax.

This lost revenue, which the state tax board estimates to be $1.1 billion annually, is critical, particularly in a time of enormous budget deficits and intolerable cuts to our schools and social safety net.

Online out-of-state merchants can under-price local stores and Californian online firms by as much as 10 percent through their refusal to collect state sales tax — they bet consumers will never pay the sales tax on their own.

Unfortunately, they have been correct thus far. In 2010, less than half of one percent of Californians paid the tax on their income tax returns.

Local bookstores, which collect sales tax and undoubtedly contribute to the health of our community, have seen their stores become Amazon’s and other Internet tax-evaders’ showrooms.

So what should we do?

First, consumers can support their local businesses and retailers.

Visit your local store in place of purchasing that new book online. A healthy local business sector is vital to a healthy community. If you do buy online, keep your receipt and pay the sales tax on its due date.

Second, lawmakers need to follow the examples of Minnesota, Virginia, New York and Arkansas by giving state tax officials the direction needed to pursue all avenues required to get out-of-state online retailers to collect taxes owed.

In conjunction with Assemblymember Nancy Skinner and and Assemblymember Majority Leader Charles Calderon, I have coauthored a package of bills that aim to close the tax loophole and put in-state retailers on level with out-of-state competitors.

Californians can contact their legislators and tell them to support state retailers, numerous regional chambers of commerce, cities and counties by supporting Senate Bill 234.

Failure to compel these out-of-state online retailers to collect sales tax gives these businesses preferential treatment by attracting consumption in California when they do not actually employ Californians or invest in our state.

This practice, unfortunately, comes at the expense of local businesses and economies.

Loni Hancock (D-Oakland) is a state senator serving the 9th district.