BeggarEd;524249 said:

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Who said I failed? I just think the vision of a "business-friendly" California has been a myth for quite some time.

None other than CNBC would agree that California is NOT business friendly: http://www.cnbc.com/id/37516038/ (Ranked #49 of 50 states)

California IS great when you look at access to capital and the abundance of the innovation of technology: http://www.cnbc.com/id/37554006/. That does not mean the state is business-friendly.

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California is not business-friendly when it comes to taxation, that is certainly true. However, there is little evidence that the high-tax environment of California has actually caused businesses or jobs to leave the state in any significant number. Maybe certain kinds of businesses have moved out, but that's no the same thing.

panoramicknob;524245 said:

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Why did you want to supplement your views on business structure with gratuitous and rhetorical quips about taxpayer funded sex changes? Oh thats right, because you are homophobic.

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Objecting to getting a tax-payer funded sex change surgery has nothing to do with me being homophobic. In theory, getting a sex change does not make someone gay. It just means getting a very expensive appendage added to (or removed from) your body along with a steady dose of hormone treatments. Personally I don't see the whole process as being an acceptable way to spend taxpayer money.

If you or someone you know are amongst the very small percentage of "men trapped in women's bodies" (or vice versa), then I apologize if I have offended you.

71Bear;524231 said:

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Why? Because it is NOT deductible on the federal tax form (excepting specific instances). California should increase the state income tax to offset sales tax. That way, residents of the Golden State who itemize, would receive monies from the Federal Gov't (by listing their income tax as a deductible item on the Federal form) to offset the increase in income tax and wouldn't have to pay any sales tax.

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Well that's interesting regarding the federal income tax deduction offset. If the no sales tax thing could go through with an equal increase in income tax, that would mean a huge boost to either the state budget or to the pockets of citizens at the cost of the feds (aka the rest of the country). How many states leverage the no sales tax thing - I'm sure they knew exactly what they were doing??

But can the legislature even raise income tax w/o a 2/3 majority though? That's why sales tax has taken over and ballooned, especially on the local level - local sales tax doesn't require state legislative approval.

If people want to argue that the CA state constitution isn't completely F'ed up, I say go ahead and try.

hanky1;524260 said:

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From a governance perspective, California IS a business unfriendly environment. And I am an entrepreneur who has started venture backed companies. This is especially true of SF. Some of the more visible startups in SF have strong-armed the SF govt to get tax breaks (e.g. Twitter and Zynga), but unless you have the political connections to pull that off you'd be foolish to start AND grow a company in SF.

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I'm not exactly sure what you mean by "governance" in this context, but you can probably appreciate how much easier it was to obtain venture financing in the bay area than had you located your business elsewhere. As a lawyer who represents VC backed companies, I don't disagree that government agencies in California can do a lot to generate a more business-friendly climate, but for a number of reasons there is still no better place to start a tech focused business than the bay area. I don't anticipate that to change in the foreseeable future.

What this is all about is whether California can require that Amazon collect California tax from its California customers. It's not a new tax imposed on Amazon or on California consumers, but a fight over a collection mechanism and whether Amazon can maintain a competitive edge over California retailers.

California imposes a sales tax on retail purchases of tangible personal property in California; the tax is imposed on the retailer, who passes it along to the purchaser (the consumer). The retailer collects this tax and pays it over to the State.

California also imposes a use tax on retail purchases of tangible personal property to the extent that California sales tax was not imposed on the transaction. The purpose of the use tax is to protect California retailers against competition from out-of-state retailers; the use tax is commonly used as a backstop by states with sales taxes. The use tax is imposed on the purchaser (the consumer), who is obligated to report it and pay it to the State. For ease of administration, your California individual income tax return (Form 540, Line 95) asks you to report untaxed retail purchases and to include your California use tax liability as part of your total tax due California for the year. The problem is that a lot of California taxpayers simply don't comply with their use tax obligations. Requiring internet retailers to collect the use tax would remedy that problem.

SitkaBear;524268 said:

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Watch out, the Gay Mafia is on patrol.

Just like the Israelis, if you happen to make a dispariging remark about mo's, no, not mo's, homos, no, not homos, queers, no, not queers, queens, no, not queens, ..... ugh, ... you get your jock handed to you.

But really, what should we call homosexuals aside from LGBT's. And if you call yourself queens in your own world whay can't "breeders" do the same.

Who is hating now?

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In thinking how to respond, I could:

1) Take the high road, and let your sophomoric musings speak for themselves.
2) Since you obviously come from the forefront of the movement, pose the question to you: what is the preferred moniker for your people these days?

As for the Israeli part, I don't even have the energy.

ColoradoBear1;524269 said:

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The affiliate based in CA has to pay income on what Amazon gives him (which is only 2-4% of the sale I believe). Sales tax lost is on the full purchase price which is how amazon gains a competitive advantage. An instate CA business selling a product to an instate CA customer also has to pay income tax and sales tax. You can call that a double tax if you like too.

I have not read the exact details of this law (and for that matter couldn't decphier it anyway) - it could be poorly written, poorly executed, or poorly conceived. If that's what you are arguing, throw me some details and I would probably agree with you. But as I see it, the amount of business tax derived from the amazon affiliates is miniscule compared to the sales tax lost. So it sucks for affiliates, but Amazon is the one doing bullying here.

But if you are saying that CA trying to tax out of state purchases is anti business, that is dead wrong. By the way, Texas sent Amazon a bill for $269 million in uncollected sales tax revenue last year. All states are after Amazon, but I think it will really take federal law to make it stick.

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So my point is basically this... The loophole that allows e-commerce retailers to avoid charging sales tax in many states (because they do not have physical locations in those states) is outdated and in need of change.

However, using affiliates as the justification for why a company like Amazon should pay tax in any given state is a bad approach (in my opinion). In my original example, the transaction between a Washington company (Amazon) and a Texas consumer, Amazon should be paying Texas sales tax, and the California affiliate who helped facilitate the transaction should really have nothing to do with it. As you stated, in most cases the affiliate only makes a small percentage commission on the sale, and will be paying California income tax on their earnings anyways.

It's not like the root cause of this debate has anything to do with small business vs. big business anyways. You've basically got Best Buy, Wal-Mart and the big box retailers funding this fight versus Amazon.

The inmates in Sacramento are running the Asylum and have no clue about just how unfriendly this State is to business, particularly small business. And it is small business that producers the greatest numbers of jobs. No wonder our unemployment rate is even greater than the national average.

Now that Brown is back as Governor they are doubling down and seeking even more taxes, more overly restrictive and unhelpful environmental and other reglations while ignoring things like unfunded public employee pensions. Even Willie Brown wrote about the excessive wages and benefits for public employees in the SF Chronicle.

The politicians in Sacramento are foolish not to recognize that they are in competition with other states for jobs and business. As noted above California unemployment is already several points higher than the already incredibly high national average (thank you BO/Reid/Pelosi) and this is much more likely to get worse as harmfull bills like AB 32 phase in... legislation that does no measurable good for our state or the environment but further sabatoges our economy. There is a lot of bad science behind AB 32 and other job killing policies of CARB (http://sppiblog.org/news/faulty-science-behind-states-landmark-diesel-law).

I worry about the future of the golden (bear) state.

AU_Bears;524246 said:

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No sales tax? But then people from out of state would come to California to buy goods, spurring growth. We certainly don't want that!

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Yeah right. Our neighbor to the north, Oregon, doesn't have a sales tax. When was the last time you heard of someone in California going to Oregon to buy good?

Only those right on the Oregon-California border do that, and only with cars. Definitely not with smaller items.

I don't think anyone is arguing that CA needs to tax more. It's just that if you are going to tax, tax all.

BeggarEd;524282 said:

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So my point is basically this... The loophole that allows e-commerce retailers to avoid charging sales tax in many states (because they do not have physical locations in those states) is outdated and in need of change.

However, using affiliates as the justification for why a company like Amazon should pay tax in any given state is a bad approach (in my opinion). In my original example, the transaction between a Washington company (Amazon) and a Texas consumer, Amazon should be paying Texas sales tax, and the California affiliate who helped facilitate the transaction should really have nothing to do with it. As you stated, in most cases the affiliate only makes a small percentage commission on the sale, and will be paying California income tax on their earnings anyways.

It's not like the root cause of this debate has anything to do with small business vs. big business anyways. You've basically got Best Buy, Wal-Mart and the big box retailers funding this fight versus Amazon.

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Fair enough. Mostly agree on the first two, it's a round about way to enforce sales tax that probably won't work in the end (especially since most amazon purchases aren't even done through affiliates).

I am now remembering that CO tried this a few years ago and amazon pulled the same tactic to discourage. What i believe the CO law said was that because amazon had Amazon had affiliates in the state of CO, that meant according to state law amazon had a 'physical' presence in the state, which put the burden to collect sales tax on amazon not the consumer. It actually did not put any burden on local affiliates to collect such sales tax and it did not require a buyer in a third unrelated state to pay local sales tax due to the affiliate.

Amazon responded by threatening to yank affiliates, just as they are doing in CA... so I am assuming the CA law is similar now? Even if every one of the 49 states enacted that law, amazon could just pull affiliates in every state.

Yes, from my understanding I think the California law is similar if not pretty much the same as what Colorado did. In any event, smarter minds than me seem to think this whole battle will be irrelevant sooner than later anyways: http://www.businessweek.com/magazine/content/11_24/b4232041319222.htm

"Actually, being forced to collect sales tax may not turn out to be so bad for Amazon. Analysts at Wells Fargo Securities (WFC) recently surveyed a range of products and found that even without factoring in sales tax, Amazon's prices were, on average, 5 to 6 percent lower than Wal-Mart's and 12 to 13 percent below Target's. And without having to worry about sales-tax consequences, Amazon will be able to freely add shipping centers near every major city and accelerate its push toward delivering products overnight, or even on the day they're ordered. "Each year that passes, the relevance of sales tax to Amazon's success is less and less," says Morgan Stanley (MS) analyst Scott Devitt, who notes that the company keeps getting more efficient as it gets larger. "If you look five years out, when there's probably a policy in place, it's possible Amazon will be better off for it. That's not something I would have said before."

Unit2Sucks;524277 said:

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I'm not exactly sure what you mean by "governance" in this context, but you can probably appreciate how much easier it was to obtain venture financing in the bay area than had you located your business elsewhere. As a lawyer who represents VC backed companies, I don't disagree that government agencies in California can do a lot to generate a more business-friendly climate, but for a number of reasons there is still no better place to start a tech focused business than the bay area. I don't anticipate that to change in the foreseeable future.

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Absolutely agree. California, specifically the bay area, is a great place to start a tech company....mainly because of the available talent and proximity to investors. But the seeds for those factors were planted long ago when california WAS a friendly place to start a business. Today it isn't...things are different now and even amongst bay area VC firms you're seeing regional funds (outside of california) pop up. My point is....actually I'm not even sure what my point is....I'm just a crazy guy who's been working way too much this week.

ps-which law firm do you work at? You can PM me if you prefer.

taxbear;524279 said:

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What this is all about is whether California can require that Amazon collect California tax from its California customers. It's not a new tax imposed on Amazon or on California consumers, but a fight over a collection mechanism and whether Amazon can maintain a competitive edge over California retailers.

California imposes a sales tax on retail purchases of tangible personal property in California; the tax is imposed on the retailer, who passes it along to the purchaser (the consumer). The retailer collects this tax and pays it over to the State.

California also imposes a use tax on retail purchases of tangible personal property to the extent that California sales tax was not imposed on the transaction. The purpose of the use tax is to protect California retailers against competition from out-of-state retailers; the use tax is commonly used as a backstop by states with sales taxes. The use tax is imposed on the purchaser (the consumer), who is obligated to report it and pay it to the State. For ease of administration, your California individual income tax return (Form 540, Line 95) asks you to report untaxed retail purchases and to include your California use tax liability as part of your total tax due California for the year. The problem is that a lot of California taxpayers simply don't comply with their use tax obligations. Requiring internet retailers to collect the use tax would remedy that problem.

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I'm surprised your points aren't the ones being discussed. The use tax addresses the perceived shortfall in the state's coffers. Amazon being taxed by a state government that it is not a constituent of and does not receive services from is "taxation without representation," isn't it? To paraphrase a line I read somewhere, we aren't talking about what's fair, we're talking about the law.

I must admit, having no sales tax in Oregon is pretty awesome.

hanky1;524260 said:

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Some of the more visible startups in SF have strong-armed the SF govt to get tax breaks (e.g. Twitter and Zynga), but unless you have the political connections to pull that off you'd be foolish to start AND grow a company in SF.

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I don't know.. San Francisco: public transportation, wide variety of lunch cuisines in walking distance
Santa Clara: Olive Garden, Quizno's and a pair of Indian lunch buffets within a short drive from the office park

Perks that lure employees have value to new companies

FingeroftheBear;524287 said:

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Corporations aren't going to leave this...they need this.

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Exactly. I work for a company that does business on 6 continents. California is the most profitable place we do business. When California does something we don't like our leadership bitches and moans and then gets back to work.

BearyWhite;524306 said:

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I don't know.. San Francisco: public transportation, wide variety of lunch cuisines in walking distance
Santa Clara: Olive Garden, Quizno's and a pair of Indian lunch buffets within a short drive from the office park

Perks that lure employees have value to new companies

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Seems like more commuters coming south out of the city to Google et al than the reverse.

yellerbear;524216 said:

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Sorry, when I hear people chime California being anti-business, it really is code for reducing business taxes and eliminating environmental regulations, two things which have contributed into making California great.

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I don't mind paying my taxes or environmental regulations, but I've seen several projects were various local and state agencies apply different and sometimes contradictory regulations. It becomes expensive, is a huge time sink for those involved, and some times doesn't really solve the environmental issue, so much as meeting a poorly written regulation. This might discourage businesses with limited resources (small) from making things in California, however it is less of an problem for large corporations or service based business who aren't producing physical products.

Regulations aren't the problem, navigating the multiple agencies with different and sometimes conflicting priorities is. Simplify the process and (I think) a lot of the complaints will go away (without sacrificing the environment).

But this is not an effort to impose a tax on Amazon. It's an effort to require Amazon to collect a tax from its California customers that the customers owe. Internet retailers with sufficient presence (under Constitutional standards) in California are required to collect this tax; the "affiliate law" is one that several states (NY being the most notable) have passed to establish that the use of affiliates provides a sufficient presence in the state to require the retailer to collect the tax. Amazon lost court challenges in NY, and now collects the NY tax.

71Bear;524231 said:

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Maybe we should take a hard look at the most regressive tax that is in place in this country.

IMO, California should reduce the sales tax to ZERO. In other words, don't fight Amazon, join them.

Why? Because it is NOT deductible on the federal tax form (excepting specific instances). California should increase the state income tax to offset sales tax. That way, residents of the Golden State who itemize, would receive monies from the Federal Gov't (by listing their income tax as a deductible item on the Federal form) to offset the increase in income tax and wouldn't have to pay any sales tax.

I don't understand why the powers that be in this state don't stick the feds with the bill instead of us...

More evidence why Califonia is going down the dumper - stupid "leadership"...

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I nominate you for best post.

More idiocy from the state's that are trying to figure out a way to collect sales tax from people who purchase stuff in state's that don't have a sales tax...

My daughter lives in NY. I completed her tax forms for her in April. In NY, you must include the value of stuff you purchased in a non-sales tax state (i.e., NH) if you bring it back to NY for use there. Then you calculate the sales tax you would have paid on that item and include that amount in the total owing to the state. The example they cite in the tax booklet is priceless. To wit... For example, if you purchase a book in New Hampshire and take it back to NY and read it there, you must include the sales tax you would have paid had you bought the book in NY in the amount of your tax owing to NY.

The tax structure in this country is completey screwed up and there is no hope of seeing any improvement no matter who is in charge......

71Bear;524231 said:

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Maybe we should take a hard look at the most regressive tax that is in place in this country.

IMO, California should reduce the sales tax to ZERO. In other words, don't fight Amazon, join them.

Why? Because it is NOT deductible on the federal tax form (excepting specific instances). California should increase the state income tax to offset sales tax. That way, residents of the Golden State who itemize, would receive monies from the Federal Gov't (by listing their income tax as a deductible item on the Federal form) to offset the increase in income tax and wouldn't have to pay any sales tax.

I don't understand why the powers that be in this state don't stick the feds with the bill instead of us...

More evidence why Califonia is going down the dumper - stupid "leadership"...

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This isn't that great of a post because it ignores the AMT. Poor people would definitely benefit from replacing the sales tax with the income tax but mostly because they would pay lower taxes to the state. Middle income folks would have mixed results because many would just pay higher AMT taxes to the fed. The AMT tax does not give you a deduction for state taxes. Rich people would get hurt but mostly because they would pay more in taxes to the state. In fact, sales taxes exist so that rich people don't have to pay more in taxes.

That said, I'm for eliminating the sales tax because it is so regressive.

Yeah, right. High business taxes and environmental regulations have made California great! What world do you live in?

Golden One;524425 said:

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Yeah, right. High business taxes and environmental regulations have made California great! What world do you live in?

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Would you rather go to the best public school in Oregon or the best public school in California?
Would you and your baby like to sit in a smoke free section or have folks light up next to you?
Do you like fuel efficient cars or gas guzzlers?
Do you want to put recyclables in a recycling bin or just throw it with the trash?
Do you want a refinery next to your house or have limitations of where they should be at?
Do you like smog with your scenic pictures of the golden gate bridge?
Do you think Yosemite is not as great as Disneyland?
Is drinkable tap water a luxury we can live without?

California should have about 59 fortune 500 companies based on it's population. Chevron, while headquartered in the Bay Area. long ago moved much of it's operations out of SF, and then further moved to Texas and Arizona. Wells Fargo, through it merger, moved much of it's administrative services to other state. They have 280,000 employees - with less than 20% in CA.

Most large employers find that the executives want to live here, but they do not keep the lower paid in CA. And for smaller businesses, it is clear that setting up a non-high tech firm in CA is not too smart economically.

I think Amazon should pay taxes like everyone else. But that has nothing to do with the whole other issue of taxes and regulations squeezing people out of California. Let's face it - the census showed that CA has reached it's peak growth already.

tommie317;524433 said:

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Would you rather go to the best public school in Oregon or the best public school in California?
Would you and your baby like to sit in a smoke free section or have folks light up next to you?
Do you like fuel efficient cars or gas guzzlers?
Do you want to put recyclables in a recycling bin or just throw it with the trash?
Do you want a refinery next to your house or have limitations of where they should be at?
Do you like smog with your scenic pictures of the golden gate bridge?
Do you think Yosemite is not as great as Disneyland?
Is drinkable tap water a luxury we can live without?

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It's amazing, I think, when people discount the things that our own government does for us. :headbang

drunkoski;524159 said:

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it's a loophole that should be closed. makes no sense for amazon users (which i am one) to not have to pay sales tax.

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Then I assume you pay the use tax when you file your Cal income tax return.

Willgonnabaight;524186 said:

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wrong

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Nope, right. You're supposed to pay use tax. There is a line on your 540 for this.

drunkoski;524476 said:

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we've had net losses and if you don't count illegal immigration net losses of our populace as well. i have quite a few clients who have moved themselves and their businesses to nevada because of taxes. it's still a nice place to live and that by itself is going to retain a large percentage of businesses.

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If you're in a business like biotech or high tech which relies a lot on intellectual and financial capital, then California is the place. If you are manufacturing a commodity, you're better off in other states. One of my clients told me what he saved on just his waste disposal and environmental costs on a move to Nevada and it was enough to make him profitable .

You do know that the use tax is required to be reported on your income tax return -- which you sign under penalties of perjury -- don't you?

FingeroftheBear;524287 said:

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That's the bottom line, there's no free lunch.

Any of you lads that went to UC should know better. Tax moneys build and established the great UC system...which in turn help build the great California economy via research and development.

You want the world's largest wine exporter and the nation's produce leader...you create the UCD ag and viticulture programs. You want engineers and Silicon Valley, you pay for engineering school like Cal, UCSD, Irvine. You want top rate biotech, you build and fund UCSF. You want world class infrastructure that moves the whole freakin' mess along faster, you create the world's best civil engineering program.

You want the world's 8th largest economy...you create it and that costs money. NONE OF THIS IS FREE. There is no free lunch.

Corporations aren't going to leave this...they need this.

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+1

Thank you for stating what 50 years of history has shown us. Conservatives love to vilify California and continually point to California as an example of liberals gone rampant, the tax and regulate Democrats gone out of control ruining what was once a great state. No, public investment made this state great, and despite what is reported everywhere else in the nation (by conservatives who have never stepped foot into California), our state still is great.

drunkoski;524476 said:

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we've had net losses and if you don't count illegal immigration net losses of our populace as well. i have quite a few clients who have moved themselves and their businesses to nevada because of taxes.

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Yay anecdotal evidence! According to the most recent census data, California is about in the middle of the pack in terms of % population growth:

http://2010.census.gov/2010census/data/

I have little doubt that the state has lost jobs in recent years. I also have little doubt that nearly every state has lost jobs in recent years . . . it's called a recession. California has had a high-tax, high-regulation business climate for a long time, through both boom and bust years; I don't see any real evidence that taxes and regulation are the cause of the bust years.

sycasey;524564 said:

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Yay anecdotal evidence! According to the most recent census data, California is about in the middle of the pack in terms of % population growth:

http://2010.census.gov/2010census/data/

I have little doubt that the state has lost jobs in recent years. I also have little doubt that nearly every state has lost jobs in recent years . . . it's called a recession. California has had a high-tax, high-regulation business climate for a long time, through both boom and bust years; I don't see any real evidence that taxes and regulation are the cause of the bust years.

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Actually there is considerable evidence that lack of regulation has caused these bust years. For example, Texas didn't have the housing boom and bust that California did. Some of that is due to the fact that Texas has strict regulations against cash out refinances.

yellerbear;524216 said:

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Ah. Sure. California has 12% of the Nation's population.

That certainly explains why our economy is 65% greater than the Texan economy while we only have 47% more people.

And that really goes to show why California gets issued, per Capita, twice as many patents compared to any other state in the nation.

And it certainly explain why California is home to roughly 50% of the Nation's Venture Capital.

Sorry, when I hear people chime California being anti-business, it really is code for reducing business taxes and eliminating environmental regulations, two things which have contributed into making California great.

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My opinion is that this has nothing to do with whether California is business friendly or not. This has a lot more to do with the technology boom having started in the Bay Area as a result of Cal and Stanford. However, more businesses are leaving California than coming to California. This isn't going to materially affect the tech companies in California (brain capital is more important than taxes, labor laws, or environmental laws for tech companies) or the venture capital or PE firms that invest in tech start-ups, but it will not attract other businesses that are looking to relocate.

This of course has nothing to do with Amazon. Amazon just doesn't want to have to collect the taxes (it wouldn't come out of their pocket other than for the fact that not having to collect gives them an advantage for attracting customers who are going to ignore the use tax). California is not the only state looking at this or pursuing this.

I live in California because I choose to live here. California has a lot going for it, especially an incomparable climate, scenic beauty, and abundant natural resources. That doesn't change the fact that high taxes and excessive regulation have made the state less business friendly than most. Texas, on the other hand, has almost nothing going for it--it's hot and humid, flat and ugly, and offers little in the way of leisurely pursuits. On the other hand, it has no state income tax, far less regulation, and a much more friendly environment for business. As a result, it has a much lower unemployment rate than California, has a rapidly growing business presence, and is on a sound fiscal footing. None of that changes the fact that I'd rather live in California. But don't try to tell me that high taxes and stringent environmental regulations have made California great, when exactly the opposite is true.