China Electronics Wholesaler

California Internet sales tax bill faces long odds

By Jim Christie Fri Mar 14, 3:09 PM ET

SAN FRANCISCO (Reuters) - A California bill that could leadto a tax on Internet music downloads faces slim odds ofsuccess, but the Democrat who wrote it says a debate overtaxing such online retail transactions is overdue. ADVERTISEMENT

Assemblyman Charles Calderon told Reuters late on Thursdaythat California should consider imposing a tax on entertainmentdownloaded from online merchants such as Apple Inc's iTunesthat is similar to the state's levy on music compact discs soldin stores.

Sales taxes should apply equally to online and in-storepurchases and California is missing out on revenues from therise of Internet retailers, Calderon said.

"If you walk into Wal-Mart and buy a CD you walk out payinga tax," Calderon said. "I don't think we're talking about a newtax here. We're talking about whether our laws should keep upwith the economy."

Calderon's bill would require California's Board ofEqualization to report to lawmakers on the potential forimposing a sales tax on electronic transmissions ofinformation.

For Republican lawmakers that is too close to a new tax.

They will kill the bill along with other legislationDemocrats advance to raise existing taxes or introduce newones, Mike Villines, the state Assembly's Republican leadertold Reuters. "We just disagree with it on the merits," hesaid.

Calderon's bill comes as California faces a $7.5 billionstate budget shortfall. Republican Gov. Arnold Schwarzeneggerhas ruled out raising taxes to fill it and has instead proposeddeep spending cuts.

Democratic lawmakers say the proposed cuts are drastic andsome are urging tax plans to help close the shortfall, which istaking on added urgency in the state capital of Sacramento asschool districts across the state prepare for reduced statefinancial aid.

Many are beginning to issue layoff notices to bolster theirfinances and education groups are increasing pressure onlawmakers, especially Democrats, to defend education fromspending cuts.

Democrats failed earlier this week to pass a bill throughthe state Assembly that would have imposed a tax on oilcompanies -- a 6 percent levy on oil production and a 2 percenton profits exceeding $10 million a year -- and used proceedsfor school spending.

The bill fell short of a required two-thirds support as allAssembly Republicans voted it down.

(Editing by Tom Hals)