By Dan Walters
Sacramento Bee
Let's say you want to buy a range hood exhaust fan to complete your kitchen-remodeling project.
While you'll find candidates in local stores, you may find an infinite selection from Internet purveyors at prices the locals often can't match and, in these competitive times, with free and rapid shipping.
By law, when that range hood shows up on your front porch with a receipt for, say, $200 you should file it away. When you file your next state income tax return, you should report that purchase so that you be assessed about $20 in ``use taxes" to offset the sales taxes that you would have paid on a local purchase.
A few folks obey that law, but by one official estimate, 99 percent of Internet sales escape the tax collector. That irritates California merchants and many of its politicians, who say it's unfair competition that deprives public treasuries of much-needed revenue.
How much revenue? No one knows for certain, but it could be billions of dollars each year, and it's growing. That's why Capitol politicians are trying to devise ways to tap the flow of Internet sales, but they're finding it very difficult.
Internet sellers are not required to collect taxes unless they also maintain physical presences in the state ― JCPenney being one example. So says the U.S. Supreme Court, citing the federal government's exclusive right to regulate interstate commerce.
California law says that any seller ``engaged in business in this state" must collect taxes, and that's the nexus of the political battle over taxation of Internet sales.
The point of battle is Amazon, the Seattle-based Internet colossus that not only sells merchandise directly but acts as a broker for ``affiliates," some of which are located in California.
That, tax authorities argue, is enough nexus to compel Amazon to collect taxes. The firm has resisted, saying essentially that if the state passes legislation to that effect, it will cancel its affiliate ties to California.
New York has already done it, and Amazon has sued. A New York judge upheld the state's position, and the case is making its way through the courts. A bill pending in the California Legislature ― Assembly Bill 2078 by Assemblyman Charles Calderon, D-Whittier ― would require retailers that do not collect tax directly to send the state a list of purchasers.
It could raise a billion dollars a year, advocates say, but it faces stiff opposition from online sellers and is similar to a measure that Gov. Arnold Schwarzenegger vetoed last year, so its ultimate fate is uncertain.
Retail business is clearly undergoing a historic change, and old models of retailing and taxing sales are no longer valid. Regardless of what happens to the Calderon bill, it's an indication that California's tax system is out of sync with modern reality and needs a stem-to-stern overhaul.
Dan Walters can be reached at dwalters@sacbee.com. For back columns, visit www.sacbee.com/walters. The article was distributed by Scripps Howard News Service (www.scrippsnews.com).