Is the Bell Tolling on Tax-free Internet Orders?

Tax RollTax-free Internet Orders

As of July 1, the California law requiring online retailers to pay sales tax took effect.  California is the ninth state to enact such a law.  It all started back in 1992 when the Supreme Court ruled that if a retailer does not have a physical presence in a state, the states cannot make retailers collect sales taxes.


Internet sales giant Amazon is calling the law that requires them to collect sales taxes unconstitutional and has refused to pay the sales tax.  Amazon is taking the same action as they have in the other states.  Any affiliates Amazon has in those states no longer get paid.  An affiliate is a smaller site that refers its visitors to Amazon and in turn, Amazon pays them a commission. is also refusing to collect sales tax on purchases from California.

California Law

But the California law goes beyond laws that other states like Hawaii, Minnesota and Illinois have passed.  California’s law says that the state can collect sales taxes from any retailer if it develops or designs products.  According to The Wall Street Journal, Amazon’s Kindle comes from a plant in California.

California plans on pursuing Amazon and any others who refuse to pay the taxes when they are due on October 30.  A spokesperson for California’s state tax collector, Anita Gore, said the department will follow the normal procedures for collecting a debt, including placing liens and levying bank accounts.

In-state retailers are hoping this law will equal the playing field between them and the online retailers.


About the Author

Mark Whysall

1 Comment on "Is the Bell Tolling on Tax-free Internet Orders?"

  1. Online purchases have never been tax free. California buyers are legally obligated to pay use tax on all taxable items purchased from out-of-state retailers. The fact that a retailer doesn’t collect those taxes from the buyer does not mean they are not due.

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