California Governor Jerry Brown and Democratic lawmakers have struck a deal to close the state’s estimated $15 billion budget deficit, including provisions to force online retailers like Amazon.com to collect sales tax from customers.
Like what you see? Click here to sign up for Accounting Today's daily newsletter to get the latest news and behind the scenes commentary you won't find anywhere else.
California lawmakers approved an online sales tax bill earlier this month and sent it to the governor’s desk, but Brown did not immediately sign it into law. The tax would bring in an estimated $200 million a year. The bill would allow California to collect taxes from any online retailer that has nexus with an affiliate site in California. Amazon.com and Overstock.com have been dropping their affiliates in several other states in a bid to fight against such laws.
The bill also includes two other bills that were also passed by the California State Legislature that would require online retailers that have corporate subsidiaries and distribution centers in a state to collect sales tax from customers, along with another bill that clarifies when other kinds of physical presence require a sales tax to be collected. The three bills were combined into one and sent to Brown's desk earlier this month.
The budget deal reportedly struck by Brown and Democratic lawmakers Monday was brokered without support from Republican lawmakers, but the Democratic legislators may be able to provide enough votes to get it passed, according to the Los Angeles Times. Brown had planned to call a special election later this year with tax increases on the ballot, but reportedly has abandoned that idea for now. He had wanted voters to approve the extension of several temporary tax increases that were due to expire this month, including an extra 1 percentage point sales tax increase. However, he was unable to attract the two Republican votes he needed in both the State Assembly and the Senate to allow a budget with those tax increases to go forward.
The tax increases may go on the ballot in November 2012, when they are more likely to pass with more voters heading to the polls for the presidential election.
The budget deal relies on an extra $4 billion in tax revenue that is expected from the state’s gradually improving economy. However, if the extra tax revenue does not materialize, there would be drastic cuts to programs such as education.
Other parts of the budget reportedly include an extra $12 fee for automobile owners to register their vehicles, and a new firefighting fee for residents in areas prone to wildfires. With the extension of the temporary tax increases left out of the bill, Democratic legislators were able to pass the budget deal on Tuesday with a simple majority vote.