SACRAMENTO, Calif. (FNS) -- California's click-and-mortar retailers got some breathing room last week.
California Gov. Gray Davis vetoed a bill that would have required California residents to pay California state sales taxes on certain purchases made on-line -- those made from companies that have click-and-mortar operations, with a physical presence, like a store or warehouse, in California.
The measure brought by Assemblywoman Carole Migden, a San Francisco Democrat, would not have required pure-play dot-coms to collect state sales taxes, however.
California state sales taxes range from 7.25% up to a high of 8.5% in parts of Los Angeles.
"[This measure] singles out companies that are conducting transactions electronically," Davis said, "and attempts to impose tax collection obligations on them to which, according to California courts, they are not subject.
"In order for the Internet to reach its full potential as a marketing medium and job creator, it must be given time to mature. Imposing sales taxes on Internet transactions at this point in its young life, would send the wrong signal about California's international role as the incubator of the dot-com community."
Some click-and-mortar retailers,currently charge state sales taxes on purchases made on-line because if they don't, they are unable to lawfully promote their Web sites in their brick-and-mortar stores. "At first, many tried to keep [click-and-mortar businesses] separate," observed Heather Dougherty, digital commerce analyst at Jupiter Communications. "But if they do so, they lose out on the whole synergy of having both channels for accepting returns or promoting the Web site on in-store displays or on bags or receipts."
The bill, vetoed by Davis last week, was targeted primarily at click-and-mortar booksellers -- including Barnes & Noble and Borders -- which do not charge a California state tax on Internet purchases, according to Steve Maziglio, Davis' press secretary. Dougherty said, however, that the Barnes & Noble Web site, at barnesandnoble.com, may soon begin charging state sales taxes because the bookseller has just signed a promotional deal with Yahoo to distribute Yahoo CD-ROMs in the chain's stores.
The Northern California Bookseller's Association, a lobbying group for independent booksellers, sponsored the Migden bill.
During the same session, Davis signed legislation that extends California's Internet Tax Freedom Act for another three years, a measure that placed a moratorium on user taxes for Internet service connections. He also created a state commission to develop a long-term strategy for Internet taxation.
