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Internet tax bill goes to governor

By Judith Scherr Berkeley Daily Planet
Thursday August 31, 2000

The little guys won and Berkeley led the way. 

AB2412 authored by Assesmblymembers Dion Aroner, D-Berkeley, and Carole Migden D-San Francisco, is designed to create a more level playing field for independent book sellers who charge state sales tax and California-based dot-comers that do not. 

The bill, on its way to the governor’s desk, would “clarify that the processing of orders electronically, by fax, telephone, the Internet, or other electronic ordering process, does not relieve a retailer of responsibility for collection of the tax from purchaser if the retailer is engaged in business in this state.” 

Andy Ross, who owns Cody’s books, first brought the concept of the bill to Aroner and Migden on behalf of the 300 members of the Northern California Independent Booksellers Association. 

Ross said he and other booksellers are put at a disadvantage by large corporations such as Barnes and Noble and Borders Books and Music that do not charge sales tax on their Internet purchases. 

The Daily Planet was unable to reach either of these corporations for comment. 

Ross argued that, although these giants claim their Internet and in-store businesses are separate, “they extensively cross promote.  

At Barnes and Nobles, on the walls, it says ‘buy on line.’ ” 

“California is the first state to pass a law to do this, despite (the political clout) of Silicon Valley,” Ross said. 

Aroner said the bill adds nothing to present law. “It clarifies and defines” the statues which already exist, that say a retailer doing business in California must pay sales taxes. 

“They’ll pay their fair share,” she said. Passage of the bill is estimated to bring another $14 million in sales taxes to California. 

At least one bookseller, Berkeley’s Gaia Books, may have gone out of business because of Internet competition, Aroner said: “It’s a question of leveling the playing field.” 

While the Assembly vote Wednesday was 42-31 to send the bill to Gov. Gray Davis, his spokeswoman Hilary McLean said Davis has not yet taken a position on it. 

“The governor’s general view on Internet tax is that at this point it is not a good idea,” she said. 

The American Electronics Association of Sacramento lobbied heavily against the bill.  

In an Aug. 1 letter to Aroner and Migden, Ted Casazza, the corporation’s vice president in charge of California public policy, argued that the proposed law in not merely “clarification.” 

“AB2412 adds completely new criteria to the statute – a substantial expansion of existing law.” 

That is because the bill defines the link between two corporate entities as a parent corporation having substantial ownership interest in an affiliate and a “similar name, similar product line, or cross-promotion of in-store and web sales.” 

Under this definition, Barnes and Nobles would not be able to argue that was a separate entity with no “brick and morter” status in the state. 

Further, Casazza argues, the bill does not level the playing field at all. He said that if brick-and-mortar stores and California dot-coms both are subject to sales tax, others are “beyond the reach of California law.” 

“For example, Borders Books and Music may have set up as a separate dot-com subsidiary to compete with Amazon,” which is based outside of California.  

The new bill would mean that both Borders and must collect sales taxes. “All three are disadvantaged when compared to Amazon,” he said. 

Ross agrees that he continues to be disadvantaged by corporations, such as, which have no brick-and-mortor stores in California. “The total solution has to be done through Congress,” he said. 

AB2412 can be read online at 

The Associated Press wire services contributed to this story.