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No sales tax online? Calif. leaders cry foul

December 9, 2010 12:00:00 AM PST
The malls may be crowded for the holiday shopping season, but more and more consumers have been buying their gifts online. Numbers from comscore show cyber-spending is up 12 percent so far compared to last year.

Many sites don't charge a sales tax. They don't have to if they don't have a physical store in California.

"I absolutely love it," said Linda Flowerdew, an online shopper. "I hate paying sales tax."

Apparently, so do millions of other Californians.

But the Board of Equalization sent out its annual warning to California residents reminding them that if they don't pay a sales tax online, they should pay an equivalent use tax when they file their state tax return.

The state loses over $1 billion from folks who don't voluntarily state it on their tax form. The average California household owes $60 a year.

"We need that money and that means $1 billion less for our schools, for our seniors and for our children and childcare, and the many other services that Californians expect government to provide," said state Sen. Mark Leno (D-San Francisco).

California retailers can't compete if they have to charge a sales tax while out-of-state online competitors don't.

"I don't know why they can't do some formula that would make it fair for everybody," said Melica Stijakovic, a small business owner.

None of that is enough to convince Flowerdew to be honest, especially since the state lacks the resources to enforce it.

"Anything I can get that I don't have to pay taxes on, I'm happy," she said.

Some people are honest.

The Board of Equalization said it collected $10 million from people who filled out the use tax line on their income tax form last year.

The rest face a 10 percent penalty if caught.


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