California Business – Killing Legislation

It’s becoming a race to determine who’s more business-unfriendly:  Obama or Jerry Brown!

The ink was hardly dry on last week’s California business-killing legislation (i.e.-the tax on Internet sales brokered through affiliate advertising) when Amazon.com terminated something like 25,000 of its relationships with affiliate advertisers.  The state thinks the good news is that the new tax will raise $200 million a year, but some commentators think this is a pie in the sky guess, given the expectation that others like Amazon.com will follow suit.

Amazon’s notification to its (former) affiliates says, “(The bill) specifically imposes the collection of taxes from consumers on sales by online retailers – including but not limited to those referred by California-based marketing affiliates like you – even if those retailers have no physical presence in the state.  We oppose this bill because it is unconstitutional and counterproductive.  It is supported by big-box retailers, most of which are based outside of California, that seek to harm the affiliate advertising programs of their competitors.  Similar legislation in other states has led to job and income losses, and little, if any, new tax revenue.”

So there.

And consider the commentary of California Board of Equalization member, George Runner, who notes, “Even as Governor Jerry Brown lifted his pen to sign this legislation, thousands of affiliates across California were losing their jobs.  The so-called ‘Amazon tax’ is truly a lose-lose proposition for California.  Not only won’t we see the promised revenues, we’ll actually lose income tax revenue as affiliates move to other states.”

Are you listening, Nevada??

And here comes the IRS National Taxpayer Advocate, with her June 30, 2011 Report to Congress containing fiscal year 2012 objectives.  Some of the Advocate’s more noteworthy comments:

~During the recent threat of a lapse in appropriation, the IRS revised its contingency plan to identify the limited functions it could perform if the government did, indeed, shut down.  The Advocate estimates that, during the week in which the shutdown might have occurred, over a million callers would have experienced long delays (if their call was answered at all), a quarter of a million taxpayers would have been turned away at “Taxpayer Assistance Centers,” and more than 100,000 pieces of correspondence would have been added to open inventories across the country.  (Really?  As if this isn’t already the case!)

~In FY 2012, the Office of the Taxpayer Advocate will continue its research concerning the trade-offs between the benefits delivered through the tax system and the tax code complexity that erodes compliance.  And yes, you may wish to contribute to the Advocate’s latest gimmick: an electronic suggestion box in which taxpayers may suggest what they might be willing to give up if others would also relinquish tax breaks, resulting in a simpler tax system.

~The IRS needs to improve its identity theft victim assistance strategy.  (No kidding!)  But the Advocate frets that IRS doesn’t have adequate staffing to handle this additional workload.

And there you have it.

CONSULT YOUR TAX ADVISOR – This article contains general information about various tax matters.  You should consult your CPA regarding the implications to your own particular situation.

Jeff Quinn, the author of this article, is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno.  He can be reached at 831-7288, welcomes comments at jquinn@ashleyquinncpas.com, and invites readers to consider his other commentaries at http://blog.nolo.com/taxes/.