Gov Schwarzenegger Terminates Nexus Tax, Overstock Going Back to Cali

by on July 2, 2009 · 9 comments

Yesterday was a big day for any business, nonprofit organization, or fundraiser that relies on affiliate advertising that depend upon Internet advertising for important revenue and fundraising efforts: Governor Schwarzenegger vetoed the nexus tax and calls up Overstock.com to invite to reinstate their affiliates in California.

As we’ve written previously, all sorts of organizations depend on Internet advertising. Online companies are experimenting with new ways to deliver products, services, and content, and business of all kinds are going online to reach consumers and advertise to receptive audiences. The Gov’s veto sends a strong message that this growing business model is welcome in California.

It is important to note that the proposed budget legislation was indeed a tax increase. Contrary to the statements of nexus tax proponents, in no event would new money flow into California. Any incremental sales tax collected from online sellers just moves from the California purchaser to the state treasury, at a time when households are being squeezed by a struggling economy. The result: fewer advertising dollars would flow to California publishers and websites who employ and serve California’s residents today.

And this is one tax increase that would have serious unintended consequences. An affiliate advertising tax would harm California businesses, nonprofit organizations, and even public schools that depend upon Internet advertising for important revenue and fundraising efforts.

  • DB

    Incorrectly labeling this a tax increase only hurts use tax education and compliance. I understand the political reasons for framing this as a tax increase, but it actually makes the problem worse to further the notion that purchases from out-of-state vendors are currently tax-exempt. These goods are in fact already taxed at exactly the same rate as items purchased from brick and mortar stores–the issue at hand is over who shoulders the collection burden, not whether there should be collection at all!

    Use tax compliance is abysmal because use tax education is nonexistent. As soon as California shows its serious about enforcement, compliance will pick up considerably. I bet if the state approached Amazon and Overstock, they could probably get some voluntary cooperation in efforts to audit use tax evaders (I'd say they probably owe the Governor a favor…)

  • newsmonster09

    Taxes or not, this is the wrong time to be writing IOUs: http://www.newsy.com/videos/california_s_new_cu

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  • DB

    Incorrectly labeling this a tax increase only hurts use tax education and compliance. I understand the political reasons for framing this as a tax increase, but it actually makes the problem worse to further the notion that purchases from out-of-state vendors are currently tax-exempt. These goods are in fact already taxed at exactly the same rate as items purchased from brick and mortar stores–the issue at hand is over who shoulders the collection burden, not whether there should be collection at all!

    Use tax compliance is abysmal because use tax education is nonexistent. As soon as California shows its serious about enforcement, compliance will pick up considerably. I bet if the state approached Amazon and Overstock, they could probably get some voluntary cooperation in efforts to audit use tax evaders (I'd say they probably owe the Governor a favor…)

  • newsmonster09

    Taxes or not, this is the wrong time to be writing IOUs: http://www.newsy.com/videos/california_s_new_cu

  • http://www.religioustolerance.org/chr_sat1.htm Satan's Throne

    One small step for mankind.

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