California considers enforcing sales tax on Web

The California state Senate Wednesday passed a bill that, if approved by

the state Assembly and signed by the governor, will require all California-based

companies to add sales tax to online purchases.

The bill is aimed at the ambiguous area of taxation on the Internet

and targets companies that are based in California and have an online presence

but don't charge taxes on purchases. While there has been widespread debate

about how to apply sales taxes to online purchases, no other state has passed

such legislation.

"This bill would clarify that the processing of orders electronically,

by fax, telephone, the Internet or other electronic-ordering process does

not relieve a retailer of responsibility for the collection of the tax from

the purchaser if the retailer is engaged in business in this state," the

bill states.

"I think it's a good idea," said Andrew Bartels, vice president and

research leader at Cambridge Mass.-based Giga Information Group Inc. "There's

no inherent reason why Internet retailers should be treated any differently

than brick-and-mortar companies."

But he noted that there could be a problem in trying to implement sales

taxes in a nationwide effort because state sales taxes differ so greatly.

"There are literally thousands of different sales tax regimes that vary

by state, by county, by product. It's very complex. It would require a complex

software program to figure out all the different taxes," he said.

Bartels added that smaller companies may not have the resources to implement

such a plan. He added that by leading this trend, California might encourage

other states to enforce sales taxes on Internet purchases. The bill still

must be signed by Gov. Gray Davis.

While a majority of U.S. governors advocate some form of Internet sales

tax, Davis is the exception and has said in the past that the Internet is

creating wealth for his state without the imposition of an Internet tax.

Patrice Sellick, manager of media relations at the International Council

of Shopping Centers, which is a member of the Washington, D.C.-based e-Fairness

Coalition, said the coalition supports a measure that would require an Internet

sales tax because it would even the playing field for all consumers and

companies.

"Wherever a shopper chooses to make a purchase, we would like to see

people taxed fairly," she said.