How the iPad 2 and Tax Code Upgrades Can Help Fix Our Budget Mess

By: Juan Carlos Sanchez

“Then you better start swimmin' or you'll sink like a stone, for the times they are a-changin'.”

After a year of making fun of Apple’s iPad and those who dropped about half a grand for the oversized iPod Touch, I found myself making a complete one-eighty and purchasing the iPad 2.

But before you dismiss me as just another narcissistic San Francisco yuppie blogger that wants to justify, and somewhat show off, his purchase – let me just say that you would only be partially correct.

Truth is, the iPad 2 is amazing.

I found myself lost for hours as I downloaded app after book after movie. And what better movie to christen my iPad 2 than, of course, The Social Network – a movie I downloaded through iTunes for twenty bucks and was able to watch later on my television. So, as I consumed more media in three hours than I had purchased in the last three months, it was clear to me where the future – and business – of media is heading. But, most importantly, it was clear why brick-and-mortar businesses like the late Borders Bookstore are fast becoming an endangered species and why California needs to upgrade its tax code by passing Assemblymember Nancy Skinner’s “Amazon Tax” Bill.

What’s the old adage? “In this world, nothing can be said to be certain except death and taxes.” Well, that’s only half true when it comes to media you buy on iTunes and other online sites like Amazon.

Those missed taxes aren’t a drop in the bucket. A University of Tennessee report last year estimated that uncollected Internet sales taxes would cost state and local governments over $11 billion a year by 2012. California, in fact, lost $1.15 billion last year alone from not having such a tax. And, when our state is firing bright and passionate teachers while cutting services to the needy because of a $26 billion budget deficit, it’s outrageous that we are not paying our fair share of online taxes.

Cover to Cover Bookseller owner Mark Ezarik leaves this touching final note

We’ve already seen too many of our favorite neighborhood bookstores here in San Francisco fold, and I’m not talking about big chain stores like Borders either. Back in early 2009, Stacey’s Bookstore off Market Street closed after 85 years as web-based book sellers, the economy and other factors led to a 50% sales drop from 2001. And, this month, the beloved Cover to Cover Booksellers bookstore in Noe Valley closed its doors for the final time – leaving this touching note (pictured right).

To make matters worse, more and more people – because of douchie dorks like me with their sweet iPads – are expected to grow the e-commerce industry at the expense of offline stores that do collect sales taxes. Apple sold an incredible one million units of the iPad 2 during its debut weekend and the wait is now almost five weeks for online orders. Lucky for me, my sister endured the four-hour wait outside the Apple Store.

According to the latest figures from the Association of American Publishers, e-books revenue grew 164.8 percent in December 2010 versus the same month a year before.

This trend was a big factor in the demise of my favorite bookstore, Borders. In fact, Michael Serbinis, CEO of e-reading devices Kobo and Borders’ business partner said, “While the e-book market is booming, the physical book market has started to feel some of the effects of digital growth.” He went on to add, “The news has been filled with challenges of book retailers around the world, most notably about Borders Group...”

So, back to the possible solution – the  “Amazon Tax” Bill.

In a nutshell, Assembly Bill 153 would upgrade our tax code by making Amazon collect sales tax if it uses marketing affiliates in the state, the ones who do the actual selling. Assemblymember Skinner said the bill could generate up to $500 million a year – money that can go to pay for vital social services. But, if the legislation passes, Amazon is threatening to drop those 10,000 affiliates. How did our fearless leaders in Sacramento respond to the ultimatum? The Assembly Revenue and Taxation Committee Chairman Henry Perea boldly put the bill on the committee’s “suspended file.”

I love taxes as much as the next person. But I also want to see a California that values its teachers and protects its most vulnerable. And, that is why I am more than willing to pay my fair share in sales taxes the next time I download Angry Birds, Mad Men Season 4, or the latest Malcolm Gladwell book on my iPad 2 – yes, I have to distinguish between iPad and iPad 2.

So, California, remember, “For he who gets hurt will be he who has stalled.” So, please, upgrade our tax code by passing legislation like Assemblymember Nancy Skinner’s “Amazon Tax” Bill before its too late.

ConnorO'Gara's picture

Yes on e-commerce taxes

I am, as a rule, against excessive taxation. I believe in taxation with representation & feel that property owners in CA are heavily taxed and under-represented.  If we do have a special election in June to extend current taxation, I would vote against it.

However, the idea that Amazon doesn't have to collect sales tax because its not a brick & mortar store is a 'cheat' of the tax system.  In theory, the consumer should pay the sales tax at the end of the year with his/her State filling.  I would imagine very little is ever claimed since this is an out of pocket expense to the tax payer. 

If you live in CA, and the products are shipped the product to CA, then you pay the CA sales tax, period. 

The more important question is shouldn't we throw away the current tax system and start over from scratch?  I'd love to see a system like Obama's Debt comission report put in place to reduce abuse, simplify the system to long term and short term investors have an equal playing feild and we can close the budget gaps.

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