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Cali Forcing Online Retailers to Collect Tax

Published June 30, 2011

SACRAMENTO, CA (BRAIN)—A new California law requiring out-of-state online retailers such as Amazon.com and Overstock.com to collect sales tax could level the playing field for Golden State bike shops. The law takes effect today.

But brick-and-mortar dealers aren’t “California Dreaming,” expecting a whirlwind of cash to hit their cash registers.

“It might help,” said Marisa Harold, store manager at Bay Bikes in Carmel, California. But she doesn’t expect it will result in a huge financial windfall. “Those are two different customers,” said Harold, referring to those who shop online and those who prefer brick and mortar. Those who shop online, she said, generally dedicate themselves to finding the best deal no matter what.

Fred Clements, executive director of the National Bicycle Dealers Association, said it’s only fair that online companies collect sales tax if California brick-and-mortar stores are forced to do the same.

“The government should not be favoring one form of retail over another with discriminatory tax policy,” Clements said. “If you tax one, tax them all. It’s unfair and outrageous to do otherwise.”

While Clements is pleased that California’s legislators are righting what he perceives as a retail wrong, the best long-term solution would be federal legislation, he said.

Gov. Jerry Brown signed the bill Wednesday calling it a “common sense” solution. Amazon.com immediately dropped upwards of 10,000 affiliates in California. Affiliates earn commissions on customers who click-through affiliate sites to Amazon or other online retailers.

The new law could bring an estimated $317 million a year to state’s coffers, according to the Los Angeles Times. California is the seventh and largest state in the nation to impose an online sales tax.

And there’s more good news for the state’s brick-and-mortar dealers. Today, California’s basic sales tax drops to 7.75 percent, as a 2-year-old temporary increase expires. The city of Los Angeles falls back to 8.75 percent.

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