Copyright 2000 The Chronicle Publishing Co.
The San
Francisco Chronicle
JANUARY 20, 2000, THURSDAY, FINAL EDITION
SECTION: NEWS; Pg. A3
LENGTH: 531 words
HEADLINE:
Migden Calls for Internet Sales Tax;
Focus on online
retailers with stores in state
BYLINE: Lynda Gledhill,
Greg Lucas, Chronicle Sacramento Bureau
DATELINE:
Sacramento
BODY:
Retail businesses that conduct
sales on the Internet and also have stores in
California would have to collect sales tax under a bill that
will be introduced next week by San Francisco Democratic Assemblywoman Carole
Migden.
The bill puts California in the center of a highly charged,
big-money battle between independently owned brick-and-mortar stores and large
e-commerce retailers.
Currently, online retailers such as
Barnesandnoble.com and Borders.com do not charge California sales tax
because their Internet subsidiaries are based outside the state.
But other online retailers -- such as Macys.com and EddieBauer.com -- do
charge sales tax because they do not use separate out-of-state subsidiaries to
operate their online business.
"This isn't right. It creates a
competitive disadvantage," Migden told The Chronicle.
INCONSISTENCY
ALLEGED
She said the Board of Equalization has not been consistent in
its enforcement.
"It's decided by whimsy or by individual standard," she
said. "It shouldn't be interpretive. It should be clear.
"If it is a
California retailer with an Internet subsidiary, then it is a
California business. They can't avoid sales tax in the state."
At issue is a 1992 U.S. Supreme Court decision that requires merchants
to collect sales tax only in states where they have a physical presence, or
"nexus."
In the past, Borders and Barnes & Noble have said that
their stores do not constitute nexuses for their Web divisions because their
Internet operations are separate subsidiaries.
OTHER PRODUCTS INVOLVED
This situation is not unique to the book business. Examples of other
large companies with stores in California that do not collect sales
tax on their Internet sites include Gateway Computers,
CompUSA and KB Toys.
A national panel charged with recommending an
e-commerce taxation plan to Congress is investigating these issues.
Migden said California should be in the middle of that debate.
"We're the largest state in the union," she said. "We are the heartland
of e-commerce. We are promoting an effort to create a resolution. There will be
debate. I'm not saying this is the only resolution. But something has to be done
to make it fair."
SMALL STORES CONCERNED
Taxation on the
Internet has also become an issue for small retail stores that have a hard time
competing with Internet giants.
"The current state of affairs is totally
unfair to community-based business," said Andy Ross, president of Cody's Books,
a Berkeley independent. "In every way, these chain bookstores are all over
California. They promote their dot-com subsidies through their stores, and their
stores on their Internet sites. However, they fail to collect
sales tax on Internet transactions. It is
harmful to main street and the shopping mall."
If it passes the
Legislature, Migden's bill will get a chilly reception from Gov. Gray Davis.
"The governor is opposed to taxing the Internet. We should give this
(issue) the opportunity to grow," said Michael Bustamante, press secretary for
Davis.
If Davis signs the bill, the new law probably would be challenged
in court by companies opposed to any expansion of Internet taxes.
GRAPHIC: PHOTO, Carole Migden
LOAD-DATE: January 20, 2000 
