On Wednesday, California Governor Jerry Brown signed into law ABX1 28, legislation which will impose a sales tax on purchases made from out-of-state online retailers. The law extends a business’s nexus standard to include in-state advertising affiliates, subsidiaries, and in virtually any other way the Board of Equalization decides. By signing this legislation, Governor Brown has effectively decreased in-state investment and driven jobs out of an already ailing state.
While written with the purpose of raising taxes, this legislation will prove to be extremely counterproductive for the state’s economy. Amazon.com, one of the online retailers which would be affected by the Internet tax, has already started to cut ties with its in-state advertising affiliates, which are small businesses dependent upon these contracts. More than 25,000 affiliates will be affected by the California law’s passage.
One such affiliate, Ken Rockwell from San Diego, has already stated his intentions to move his photography business out of the state as a result of the Internet tax. Of this, Rockwell stated “Will it be Las Vegas or Scottsdale or Ensenada? It’s a question of where, not if.” Thus, Governor Brown is driving much-needed jobs out of a state which is already suffering from an 11.7% unemployment rate.
This pattern has been witnessed in other states that have already implemented the Internet tax, such as Rhode Island and North Carolina. In these states, there has been no extra revenue generated. In fact, their respective economies have only worsened. Online retailers made the practical decision to move their business out of the state to avoid being subject to the tax, taking jobs and investment with them.
While Governor Brown has touted the Internet tax measure as “common-sense,” it is anything but. If his idea of “common-sense” is trampling on the U.S Constitution to drive investment and jobs out the state, one can only imagine what he considers nonsensical.