Walters: Who Should Collect Online Sales Taxes? – GV Wire

While 1% may not seem like much, if it’s 1% of $ 700 billion, that’s a lot of money for anyone not called Bezos, Gates, or Buffet.

Californians spend about as much each year on taxable products, from chewing gum to earthmoving equipment, and sales taxes can be as high as 10%.

It is a major source of revenue for the state, overtaken only by income taxes, and a mainstay for city and county budgets, which are guaranteed a reduction of 1% or about $ 7 billion per year. unrestricted income.

The catch comes when the authorities allocate the 1% between these local governments.

Decide where sales tax on online purchases is allocated

Dan Walters


For decades the local share has gone to the jurisdiction in which the sale took place, a doctrine known as “situs”. He encouraged local authorities to maximize retail outlets, such as auto centers and shopping malls, often using – or abusing – their redevelopment powers to subsidize income-generating developments.

The advent of internet shopping from online sites like eBay and digital powerhouses like Amazon has dramatically changed that. If a Californian orders a taxable item from Amazon or Walmart and has it shipped from a warehouse, who receives the local government’s share of the 1% sales tax?

This often falls to the buyer’s local government, but increasingly, large online sellers are making deals with the communities in which their warehouses are located. Sellers route all local sales taxes to these communities and then receive discounts on those taxes – up to 80% in some cases.

Senate bill would require disclosure of local tax-sharing agreements

Two years ago Sen. Steve Glazer, a Democrat from Orinda and former mayor of this suburban community, passed a bill banning sales tax bribes, arguing that they unfairly deprive other local governments revenue.

However, Gov. Gavin Newsom vetoed Senate Bill 531, saying rebates are “an important local tool that is capturing additional economic activity, especially in rural and inland California towns that continue to do so. facing major economic challenges such as high unemployment rates “.

This year, Glazer is taking a softer approach with Senate Bill 792, which would require local tax-sharing agreements to be disclosed. The bill has been approved by the Senate and is pending in the Assembly.

Rural counties complain about large retailers collecting revenue

Meanwhile, rural counties are complaining that an online seller is trying to retroactively send sales taxes back to their warehouse sites rather than continuing to deliver them to the communities where their customers live.

“This large online retailer has delivery vans that constantly crisscross our county and wear down our roads,” El Dorado County Auditor-Comptroller Joe Harn told county supervisors. “It is only fair and reasonable that our community receives tax revenue to compensate us.”

Harn couldn’t identify the seller due to privacy laws, but his reference to delivery vans heavily alluded to Amazon, the country’s leading online seller with more than a dozen warehouses, dubbed “centers. distribution ”, throughout the state.

The pandemic has dramatically increased online shopping

Online sales had grown rapidly even before COVID-19 hit, but they exploded after Newsom issued stay-at-home orders to fight the pandemic and appear destined to grow even more as physical stores shrink. . Thus, the issue of sales tax allocation becomes even more pressing.

The sales tax itself is an anachronism, since it only applies to physical objects such as automobiles, appliances, and clothing. It is also riddled with loopholes and excludes services that capture an ever-growing share of consumer spending. The sales tax allocation debate is just another anomaly.

He calls for a fundamental overhaul of the role of sales taxes in an ever-changing 21st century economy, but politicians on Capitol Hill have so far been reluctant to take on the chore.

CalMatters is a public service journalism firm committed to explaining how the California State Capitol works and why it matters. For more stories from Dan Walters, visit

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David A. Albanese