As April 17 approaches, state leaders in Sacramento are nervously waiting to see what kind of tax revenue comes in -- and thus, how big a budget they can hash out. One source of revenue the state shouldn't be counting on: the use tax. The Board of Equalization estimates that annually $1 billion in unpaid taxes on online sales goes unpaid by out-of-state businesses.
It's a story about the 99% -- the 99% of taxpayers who don't pay the use tax. UC Hastings law professor Darien Shanske says most people don't even know about it.
"When you buy something from Amazon, you still owe the use tax. It's just that if Amazon doesn't collect it, people aren't gong to pay it. :
After a long battle with the state, Amazon agreed to start collecting taxes in September. But the use tax actually predates the internet – it's been on the books since 1935. Board of Equalization spokesman Jaime Garza says it was designed to deny out-of-state retailers an edge over local business.
"Retailers in San Francisco are required to pay 8.5 percent sales tax. An out-of-state retailer who doesn't collect that California tax now has an 8 .5 percent advantage over local businesses, and then the cities, the counties, the state have less money to support all those necessary services."
To encourage more people to comply voluntarily, the Board of Equalization is now letting taxpayers pay based on their income levels rather than adding up all of their receipts. The new system is expected to bring in about $10.6 million a year.