California --Sales and Use Tax: Bill Would Require Notification to Purchasers on Online Sellers' Web Sites

In theory if a retailer is knowingly advertising to and doing business with California residents, it is, by that act, submitting itself to the jurisdiction of the state. They can simply refuse to sell to Californians, which can generally be determined by the buyer's IP address.

Going by the IP address isn't really all that easy or reliable. And for tangible goods, it would seem that going by the shipping address would be the simplest and most reliable solution. For downloadable items, I suppose the billing address could be used. But I don't think California taxes intangibles. I certainly haven't seen any tax charged on my iTunes songs....

Tom Russ wrote in news:0ae004a4-7b91-4b43-b97f- snipped-for-privacy@y6g2000pra.googlegroups.com:

I pay tax on my iTunes purchases (New Jersey)

Only if the advertising is specifically aimed at California residents. If they put an ad in the New Yorker, and someone in California has a subscription and sees the ad, that doesn't count as advertising to California residents.

No, it can't. I have several web proxies available to me, in several different states; additionally, I can buy stuff while travelling.

For physical shipments, it can be determined by the blue sky room address. For other stuff purchased by credit card, they can look at the billing address. And for stuff purchased neither way, they can't tell where it's going.

Seth

I think they're paving the way for enforcing Use Tax on line 95, page

2 of form 540.

Reporting anything on line 95 of Form 540 is optional, so what is there to enforce? In any case, Franchise Tax Board (income tax) is not responsible for enforcing sales/use tax collection, that would be the Board of Equalization.

-Mark Bole

If it were optional, why would they have it? From the 540 instructions:

Use Tax Line 95 ? Use Tax. This is not a total line. As explained on page 19, California use tax applies to purchases from out of state sellers (for example, purchases made by telephone, over the Internet, by mail, or in person).

Then there is a worksheet that says to write how much you bought in other states where no CA tax was paid, the CA tax on this amount, any tax the other state charged (usually zero), followed by the difference or how much you owe CA. In other words, if the out of state internet store does not charge sales tax, you should be a good citizen and report it on your tax return.

It's not really optional, according to my reading. It's just there's no way for the FTB/BOE to enforce it, so it appears to be optional. Maybe they can enforce it on big businesses by auditing them.

The FTB/BOE are still part of a larger picture -- the broke CA government, and they will work hand in hand to collect more taxes.

Check BOE Pub 79-B

They've modified the language slightly since a few years ago, it used to say:

"If you do not want to report use tax on your income tax return, or are not required to file California income tax returns, you can complete the use tax return included in this publication."

However, it is still not mandatory to report use tax on the CA personal income tax return, and there are no issues of filing an incomplete or inaccurate income tax return if you do not do so.

The alternative, the BOE Use Tax return, doesn't even require a signature.

-Mark Bole

You must report use tax on either the personal tax return or the BOE use tax return. It is optional to report it on any one form, but then reporting on the other form makes it necessary.

My observation with the law is that it is trying to point out to CA residents that they need to pay use tax.