What is the new California online sales tax?
The new California online sales tax is making huge headlines across the country due to the fact that two major online retailers, Amazon and Overstock, have severed ties with their California affiliates as a way of protesting against the new law. Amazon is banking on a
1992 ruling by the United States Supreme Court in Quill Corp. v. North Dakota by and through its Tax Commissioner, Heidi Heitkamp http://www.law.cornell.edu/supct/html/91-0194.ZO.html which held that a state use tax imposed on an out-of-state business violates the Commerce Clause where the business does not have any physical presence in the taxing state. As of today, California buyers still do not have to pay any sales tax on purchases made on Amazon.com. However, it appears that California lawmakers fully intend on collecting sales tax from Amazon and Overstock. It’s all fun and games until somebody files a lawsuit … which I anticipate Amazon will do in the near future.
What does the new California sales tax mean for your online business?
If you operate an online retailbusiness from within California, the new sales tax definitely applies to your business and you should immediately collect sales tax from your buyers. However, if your business is located entirely outside of California and you have no business partners or connections in California, including advertisers or affiliates (independent Web operators who get a fee for directing traffic to your website), then it remains to be seen as to whether the new sales tax will apply to your business. Despite this possibility, the prudent approach for an online retailer would be to collect sales tax from buyers, even if the collected fund is held in a trust, because it is uncertain at this point how the California sales tax dispute will play out in court.
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