THUD (Part 2) California legislature repeals ABX1 28 – All to work to pass the Main Street Fairness Act by July 2012!

California legislature approves amended AB 155, repeals ABX1 28! AMZN to reinstate CA affiliates!

[UPDATED 9/10 @ 6:30 AM PDT] We were very excited to learn that in the final hour of their 2011 legislative session, the California legislature overwhelmingly passed a heavily amended version of AB I55  (California Senate voted 39 to 1 in favor, the Assembly voted 59 to 8 in favor).

Although the text of the amended bill is not yet now available for public inspection (text of substantive amendment included below), it has been reported on by several authorative sources, including California Senate Republican Leader Bob Dutton (R-Rancho Cucamonga), California BOE Member George Runner, the Associated Press, and the San Francisco Chronicle.

Here’s what we have learned so far:

  1. AB 155 (as amended) repeals ABX1 28 (see our original post “THUD! Did Congress Hear That?“)
  2. Amazon will reinstate its 10,000+ California affiliates

    “This bipartisan, win-win legislation will allow Amazon to bring thousands of jobs and hundreds of millions of investment dollars to California, and welcome back to work tens of thousands of California-based advertising affiliates,” Paul Misener, Amazon’s vice president of global public policy, said in a statement.

  3. All parties (including California legislators, local and national retailers, and Amazon) will work with Congress to pass federal legislation (the Main Street Fairness Act) by July 2012!
  4. If Congress fails to act by July 2012, the original terms of ABX1 28 will be reinstated.

As we have stated several times before, we firmly believe this is the best course of action:

As states such as California and Illinois enact affiliate nexus legislation (so-called Amazon tax laws) to attempt to collect sales tax due on online purchases, small businesses across the country are being caught in the crossfire. Affiliate marketers are forced to either find entirely new sources of revenue or flee to another state. Meanwhile, online retailers that rely on affiliate marketing are forced to either eliminate their established sales and marketing teams or come into compliance with the new laws.

The better solution is the anticipated Main Street Fairness Act, which incorporates the Streamlined Sales and Use Tax Agreement (SSUTA). SSUTA streamlines and simplifies state sales tax regulations, making it easy for retailers to collect sales tax for multiple states. SSUTA is the cooperative effort of 44 states (including California and Illinois), businesses, political leaders, and industry associations. States that adopt SSUTA have committed to make sales tax collection easier for all retailers, online and offline, large and small.

Although AB 155 has passed the legislature, Governor Brown has until October 7th to sign it into law; if he doesn’t—well, then all bets are off. Timing-wise, one would expect (or at least hope) the governor will make a decision in advance of the end-of-September deadline for Amazon to submit its half-a-million signatures in support of its referendum for voter repeal ABX1 28.

We are truly inspired by this dramatic twist of events in the legislature of the eighth-largest economy in the world. We look forward to the promised bipartisan effort in Washington, DC, to enact the Main Street Fairness Act by July of next year!

We would also like to send our most sincere (and hopefully not premature) congratulations to all of our affiliate friends and supporters in the state of California!

[UPDATED 9/10 @ 6:30 AM PDT]  The new Section 6 represents the substantive amendment to AB155:

SEC. 6.

  1. (a) Sections 1 and 2 of this act shall become operative on the effective date of this act.
  2. (b) Section 3 of this act shall become operative on either of the following dates:
    1. If federal law is enacted on or before July 31, 2012, authorizing the states to require a seller to collect taxes on sales of goods to in-state purchasers without regard to the location of the seller, and the state does not, on or before September 14, 2012, elect to implement that law, Section 3 of this act shall become operative on January 1, 2013, and Section 2 of this act shall become inoperative on that same date.
    2. If federal law is not enacted on or before July 31, 2012, authorizing the states to require a seller to collect taxes on sales of goods to in-state purchasers without regard to the location of the seller, Section 3 of this act shall become operative on September 15, 2012, and Section 2 of this act shall become inoperative on that same date.
  3. (c) The Director of Finance shall, on or before August 15, 2012, certify in writing to the Governor, the Senate Committee on Rules, the Speaker of the Assembly, and the State Board of Equalization whether or not federal law has been enacted on or before July 31, 2012, authorizing the states to require a seller to collect taxes on sales of goods or services to in-state purchasers without regard to the location of the seller.
  4. (d) For the period between June 28, 2011, and the effective date of this act, state law regarding the imposition and collection of use taxes, including, but not limited to, any reporting requirement imposed on a seller, shall be administered and applied in accordance with state law as it read on June 27, 2011.

SEC. 4. SEC. 7. This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are:

In order to lessen the burden at the earliest possible time on small businesses that are otherwise required to collect use tax, it is necessary that this act take effect immediately.

In order to clarify and confirm at the earliest possible time the obligations of certain retailers to collect use taxes from California purchasers, it is necessary that this act take effect immediately.

8 Responses to THUD (Part 2) California legislature repeals ABX1 28 – All to work to pass the Main Street Fairness Act by July 2012!

  1. […] 9/9/2011 UPDATE – California Legislature Approves Amended AB 155, repeals ABX1 28! AMZN to reinstate CA Affiliates! A… […]

  2. Ray says:

    Just a pushback alert:
    http://www.marketwatch.com/story/netchoice-finds-state-and-federal-initiatives-add-cost-and-complexity-to-the-internet-2011-09-15

    “..”With the national focus on job growth you’d think politicians would try to encourage Internet commerce, not stamp it out,” said Steve DelBianco, executive director of NetChoice. “Yet once again, the iAWFUL list chronicles legislation that has the potential to grind online innovation to a halt.”

    Topping the iAWFUL list is the Durbin-Conyers “Main Street Fairness Act (PDF),” federal mandate that all online retailers collect and remit sales taxes to multiple states – even where the retailer had no physical presence.

    The stated purpose of the Main Street Fairness Act is to “level the playing field” between online and traditional brick-and-mortar retailers by requiring online sellers to collect sales taxes on all purchases, not just those to home-state customers. In practice, the bill would impose disproportionate collection burdens on exactly the sort of small businesses that lawmakers say are vital to the economic recovery.

    According to the proponent’s own study (PDF), small businesses spend 17 cents of their own money to collect and file every dollar of sales tax they send to their home states. The Durbin-Conyers bill will greatly expand that burden by forcing small online retailers to collect for dozens of states, requiring expensive software updates, inviting exposure to an army of auditors, and cutting into resources they’d rather spend on building businesses and creating jobs. “

    • FedTax says:

      Hi Ray,

      Regarding your question “why should an indiana retailer be required to pay california sales tax” – the Indiana retailer would not “pay” the California sales tax – rather the Indiana retailer would collect the California sales tax, but only if their customer was ordering from and delivering to California.

      We, and the MSFA does not expect retailers to pay customers’ sales tax obligations out-of-pocket, just to collect and remit the sales tax from customers, exactly as bricks-n-mortar stores have been required to for more than 50 years (in most states).

      We agree that the reason this is an issue is because customers typically DO NOT file and pay their use tax returns – but we do not agree that simply asking customers self report and remit will work (because it hasn’t so far)

      Regarding the cited PriceWaterhouseCoopers study – it was published in 2006, but was researched in 2004 and was based upon costs incurred by a very small responsive population of retailers in 2003. To be blunt, this research is hopelessly out-of-date. Fortunately for all of us, technology and the internet have come along way since 2003!

      For example, in 2003 Facebook and YouTube did not exist and Google was still a private company. Also, since 2003, the Streamlined Sales and Use Tax Agreement has achieved significant simplifications in state-by-state sales tax laws, and today 24 states (more than half of the 45 states with sales tax) have voluntarily adopted its simplification measures.

      Finally, as to the cited 15% cost burden, since we launched TaxCloud in 2010, we have been offering comprehensive sales tax management services at zero cost for retailers. There remains no legitimate argument for retaining the historical undue burden challenges.

  3. […] to a Sarasota Herald-Tribune (FL) article, Florida business groups are hopeful that the deal between California legislators and Amazon—which repeals California’s online sales tax collection law in exchange for the […]

  4. […] to an article on Stateline.org, the deal between Amazon and California on online sales tax collection gives other states hope that they, too, may get online retailers to collect sales tax—though […]

  5. […] and Amazon have agreed to a deal similar to the one between California and Amazon. This deal requires Amazon to begin collecting sales tax for the state in 2014—unless federal […]

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