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Now they're making a money grab for affiliate income with proposed bill AB 178:
“This legislation will close the current loophole in California tax law which has allowed out-of-state companies to avoid collecting California sales and use tax,” said Assemblymember Nancy Skinner (D – Berkeley). “During this unprecedented fiscal crisis we cannot afford to lose sales tax revenue from out-of-state companies when our own local businesses are struggling to keep their doors open.”
So apparently Nancy Skinner doesn't realize that there will be a backlash against California affiliates just like there was against New York, and she'll be costing her constituents that earn affiliate income their livelihood.
Additionally, that affiliate income we earn is spent in CA, sales tax paid in CA on goods, and paid in CA income tax but they probably can't quantify this money (our income) so we'll all be hung out to dry in favor of other people's jobs.
One interesting emotional talking point she makes to rile up people to support this bill is this lame argument:
Independent booksellers have been hammered by unfair tax competition from Amazon for over a decade.
The booksellers are going the way of the dinosaur for the same reason the newspapers are, not because of taxes, but because online booksellers have more inventory, more available topics, and last but not least books are, just like newspapers, making the shift to all digital being read on a wide variety of devices including Amazon's Kindle.
Why are digital books an important point?
See the first link above, CA doesn't tax digital downloads!
So as the disruptive digital technology becomes even more pervasive to the book reseller market this latest attempt to collect income won't do squat except cost affiliates resellers their income.
What's the bottom line?
All California affiliates will be whacked across the board. just like with the New York tax, so that Amazon and other larger online resellers can continue to sell into California TAX FREE unabated.
That's right, California will collect NO NEW TAXES and in the end LOSE INCOME TAXES (and sales taxes) from the income we can no longer earn in California thanks to CA affiliates being shunned nationwide.
Nice try but you're going to cost many people and the state money and not earn a penny.
The hearing was yesterday and it sounds like it has been postponed again until January of 2010.
"Hearing postponed by committee" is what is listed on the official State of California website.
[edited by: BaseballGuy at 2:46 pm (utc) on April 28, 2009]
The IRS is putting an end to the grace period come Jan.1 2010
according to the CPA whom I spoke with
set up an "S corp" that way you can avoid paying self employment taxes for the first year.
That blanket statement is an extremely over-simplified piece of advice and is a minefield of problems and potentially misleading information. That advice MAY work for some people, taking into account their specific situations. Also note that you still need to pay yourself a "reasonable salary," which *is* subject to payroll taxes. Further explanation is way beyond the scope of this thread and would be better treated as a individual topic of conversation with your tax preparer.
Thanks for your concern, but your statement might be offensive to some people....in which it might suggest that they are nothing more than brainless idiots who listen to (and mindlessly follow) advice given on the internet.
1. I was throwing a plausible idea out there for people to
take to their CPA/Attorney for consideration. With the crux of the idea being not having to pay self employment tax for the first year.
If it fits their particular situation, great ! If not, no worries.
2. I would like to assume that a reasonable person would take the time to perform due diligence prior to listening (and taking action) to unqualified tax advice from some random guy on the internet (me).
Again, if I'm missing something here by trying to pass along some information that was passed down to me from a CPA, then please do correct.
[edited by: BaseballGuy at 12:42 am (utc) on May 1, 2009]