Americans for Tax Reform sent the following letter this morning to all members of the California legislature, urging their opposition to AB 155, legislation which seeks to prevent California voters from having a say on the job-killing online sales tax signed into law by Gov. Jerry Brown in June:
Dear Members of the California Legislature,
I strongly urge you to oppose the re-enactment of a tax on Internet and remote sales with the sole purpose of circumventing Californians’ ability to vote this tax down at the ballot box. Assembly Bill 155, under a recently outlined plan, would repeal and then re-enact recently passed legislation that dissolved the physical presence standard for tax collection, attempting to force out-of-state retailers to collect and remit sales tax.
For lawmakers who have signed the Taxpayer Protection Pledge, a vote in favor of this plan is a violation of your commitment to constituents to “oppose and vote against any and all efforts to increase taxes.”
By dramatically altering the tax code in order to raise revenue, these remote sales tax proposals do constitute a tax increase. While “use taxes” are owed by consumers, “sales taxes” are owed by companies that may legally pass the liability onto consumers. Forcing sales tax onto out-of-state businesses establishes a new form of taxation, while simultaneously dissolving the physical nexus standard and trampling on Commerce Clause jurisprudence. Under the U.S. Supreme Court’s decision in Quill v. North Dakota, a business must have a physical presence in order for the state to have the authority to require it to comply with tax laws.
To make matters worse, this attempt to re-establish a remote sales tax with minor tweaks is being undertaken almost entirely to prevent Californians from voting on the tax. It enshrines the new tax into law without the ability for voters to overturn it. This legislation represents an egregious end-run around the democratic process and demonstrates complete disdain for the will of Golden State voters, particularly in light of recent ballot measures that shot down other tax increases and enacted taxpayer protections against tax changes originating in Sacramento.
Already, the new law (enacted under ABX1 28 in June) has negatively impacted in-state businesses without leveling the playing field for tax collection. Almost immediately and predictably, it caused 25,000 online advertisers in California to lose some or all of their business. Moving forward, the law hands excessive and vague authority to the Board of Equalization, opening the door for regulatory actions ripe for legal challenge.
The recently unveiled plan to ensure the taxation of remote sales is not only a tax increase, but an affront to the democratic process and the U.S. Constitution. We urge you to reject AB 155 with proposed amendments or other related vehicles. Instead, the legislature should simply repeal ABX1 28 in its entirety. If you have any questions, please contact Kelly William Cobb or Patrick Gleason at (202) 785-0266.
Grover G. Norquist
President, Americans for Tax Reform