Never say die in the state legislature

By CMTA Staff

Capitol Update, July 2, 2008 Share this on FacebookTweet thisEmail this to a friend

The California State Legislature is amazingly adept at resurrecting the dead, especially when the dead happens to be a sweeping new tax proposal. In April, a bill, AB 1956 (Charles Calderon, D-Whittier), which would have imposed an expansive, unprecedented new internet tax on Californian’s who purchase digital property, failed passage in the Assembly Revenue and Taxation Committee. However, on June 25th, Assemblyman Calderon reintroduced the exact same proposal in the State Legislative Assembly’s Third Extraordinary Session regarding Fiscal Emergency.

ABx3 22 (Calderon) would alter California tax policy to the detriment of the state constitution and economy. It attempts to avoid the constitutionally required 2/3 vote requirement in the Legislature for new taxes by ordering the Board of Equalization to draft new regulations reclassifying digital goods as tangible property without providing the required underlying statutory authority.

Beyond the unconstitutionality of this proposal, the bill also contains serious flaws that reverse years of tax precedent and will harm state revenues rather than augment them.  This new tax does not limit the definition of "digital goods," potentially imposing a new tax on all electronically delivered products and services. Electronically delivered products and services include not only books and music but also information and software delivered by application service providers, digital photos, advertising images, online training, customer mailing lists, online streaming content, web-based video games and pay-per-view movies.

If enacted, ABx3 22 would create a presumption that all new electronically delivered products and services are subject to sales and use tax, potentially stifling innovation and development as these new taxes inhibit both commercial and consumer demand.

CMTA is strongly opposed to this approach, believing it to be bad tax policy and harmful to the economy.  

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