Yikes - Additional California Tax Rules re Amazon Purchasers

29 replies
There has been plenty of recent discussion about the California Amazon Internet Tax and PayPal's new reporting of all transactions. Even some threads about whether income needs to be reported if not on a 1099. This could be bigger.

Although California SB 86 has not received much notice, it will get major media play next spring as 2012 tax filings are prepared

SB 86, which was signed into law:

1 - Allows California to take your reported income and apply an estimate of how much sales tax should have been paid but was not (by companies such as Amazon), and thus how much use tax you need to pay.

This will be on tax returns that all California residents have to sign under penalty of perjury.

Expect major complaints against Amazon as Californians are suddenly socked with this tax.

You either have to pay the amount California estimates you owe, or be able to prove you owe a different amount.


2 - If you owe any California tax (such as the sales taxes Amazon did not pay), there is a new tax code (section 19266) which lets the state compile an electronic list of taxpayers owing money.

Every financial institution in California must match the list quarterly with its records, and send to California what it wants to know about you. This includes your name, address, tax id number, bank account number, etc.

You're gonna love this - 19266(d) PROHIBITS your bank from telling you that your financial records are being sent to the state.

(This is to prevent you from emptying out your account before the state can grab it.)

Since the amount is owed, the state is authorized to simply seize the money from your bank account.


I don't know about you, but I'm sure a lot of people would rather Amazon pay a sales tax than have to keep track of every receipt and purchase made over the Internet, and have their bank accounts be reported to the state for automatic "withdrawals" because something is owed.

.
#additional #california #rules #tax #yikes
  • Profile picture of the author Rob Howard
    I'm so glad I don't live in that rat-hole of a state.

    Rob
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    • Profile picture of the author Bill Farnham
      Originally Posted by ccmusicman View Post

      I'm so glad I don't live in that rat-hole of a state.
      I think you mean rata agujero of a State...


      ~Bill
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    • Profile picture of the author lisakleinweber
      Originally Posted by ccmusicman View Post

      I'm so glad I don't live in that rat-hole of a state.

      Rob
      You know, I gotta agree. California might be nice to visit, but you couldn't pay me to live there. Hawaii has better weather and beaches than California, with a lot less tax and issues.
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  • Profile picture of the author RobertMandrake
    Ouch, that sounds like a mess...

    I don't look forward to any of this.



    Robert
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    • Profile picture of the author Kay King
      If you made a decent amount of money with Amazon, the real question becomes why you would stay in California.

      I've seen blogs talking about court action and about public pressure to make CA change it practice - and I think that's a waste of time. The average citizen is NOT an affiliate and when taxes apply to "someone else" they don't care.

      For affiliate marketers perhaps the best advice is 'go East'

      kay
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  • Profile picture of the author Chase Shelby
    I am just very worried that this is going to happen soon in Texas. I've been wondering if getting involved with Amazon is worth it since from what I've read Texas is "on the fence".
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  • Profile picture of the author gananathan
    This is bigger than just affiliates. From what I am reading above it sounds like it applies to every resident of california.

    Once the citizens see what is happening, they will start protesting. This is the most absurd thing i have heard in a long time - Pay taxes based on govt estimates based on your income or prove that you did not spend that much.

    I know taxes and death are the most certain things in life, I did not know taxes can be 'estimated' too. Where are we heading?
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  • Profile picture of the author sbucciarel
    Banned
    Glad I don't live in California ... geeesh. I guess all this is their way of trying to balance and unbalanced budget?
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  • Profile picture of the author Josh Anderson
    What if you don't have an internet connection and never heard of Amazon?
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    • Profile picture of the author Rob Howard
      Originally Posted by Josh Anderson View Post

      What if you don't have an internet connection and never heard of Amazon?
      As unlikely as that sounds, my grandmother doesn't have internet and has never used amazon or purchased anything online.

      I would be fuming if that was happening to me in my state.

      Rob
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    • Profile picture of the author g36
      Originally Posted by Josh Anderson View Post

      What if you don't have an internet connection and never heard of Amazon?
      I don't think that's possible, especially in this century.
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      :)

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  • Profile picture of the author MarksWineClub
    It sucks to be sure.

    Of course, if Amazon played by the same rules as all California based businesses, this wouldn't happen. As someone who is forced to charge taxes on a state by state basis (and I round up slightly to make sure we don't short a state in which there is a single county with some crazy tax rate since we really should be zip code specific) I can simply say welcome to the club.

    The whole thing sucks and the larger companies seem to get way more leeway than local stores and affiliates which is simply wrong.
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  • Profile picture of the author YasirYar
    That seems a bit excessive to say the least, but the worst thing to do in this case would be to fight fire with fire and try to outsmart the IRS (hint: not gonna happen :p)
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  • Profile picture of the author ChickenMan
    Wow, is California trying to kill itself even more? Who in the world is running the government there to allow such bs to go on?
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  • Profile picture of the author sadiecopywriter
    I live in a state that did that years ago. (not CA,) So the Amazon door is closed forever to me I guess. (sigh) Glad there are other affiliates I can work with. I like where I live. Not moving. :-)
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    • Profile picture of the author SuResearcher
      Brian - thank you for bringing this to our attention.

      I read the text of the legislation. Like all other legislation, there is multiple parts (I've never understood this. It makes people emphasize one part over the other. And not really understand all the implications).

      I did a Google search on California SB 86. Most of the results in the first 2 pages emphasized the "Voluntary Compliance Initiative" part of the legislation which targeted "abusive tax avoidance transactions".

      The one website that did talk about the Use Tax made it out to be not such a big deal. I am not sure he realized how people would feel when they saw that either they had to pay based on reported income or on actual receipts they maintained or get on the radar for an audit.

      I also noticed that the digest of the bill makes no reference to "Financial Institution Record Match System" which is section 19266. So anybody who reads just the digest and not the complete text of the bill, won't even realize that their financial records can be accessed by the state.

      The Use Tax part of the bill says "authorize an eligible person, for one or more single nonbusiness purchases of individual items of tangible personal property" - so what happens to business purchases?

      In section 19266 there is also an option for financial institutions without the technical ability to setup a data matching system to send all account holders and their tax id to the Franchise Tax Board (FTB) so they can do the matching! Yikes indeed.

      There was one upside to reading the complete text of the bill - the FTB will reimburse banks no more than $2500 one time cost for implementing the matching system and no more than $250 each quarter for creating the matching file If my past experience in corporate IT is any indication, $2500 ain't going to create that system.
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      • Profile picture of the author kindsvater
        Originally Posted by SuResearcher View Post

        The Use Tax part of the bill says "authorize an eligible person, for one or more single nonbusiness purchases of individual items of tangible personal property" - so what happens to business purchases?
        For business purchases or personal purchases of more than $1000, it looks like you have to calculate and pay the exact amount of tax that the retailer did not pay as sales tax.

        For personal purchases of $1000 or less you can avoid the record keeping and simply pay the amount the state has conveniently calculated on your behalf.

        (Isn't that nice. Here's the amount we estimate you owe. Either pay it and quickly be done, or be prepared to spend time and have a lot of receipts and paperwork.)

        The $1000 threshold is per item, not an aggregate over the year.

        What is amazing is how this bill slipped through without publicity. But this is how politics works.

        The bill was introduced in January 2011 and this is the ENTIRE TEXT OF THE BILL:

        "It is the intent of the Legislature to enact statutory changes relating to the Budget Act of 2011."
        Then in March - * bam * - suddenly there are massive changes, a quick vote probably around midnight, and after but two days to try to figure out what this means (plus all the other major budget bills suddenly being rushed), it's a done deal.

        .
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        • Profile picture of the author SuResearcher
          Originally Posted by kindsvater View Post

          What is amazing is how this bill slipped through without publicity.
          Amazing indeed. Makes me wonder what else slipped right through in a similar manner.
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    • Profile picture of the author Gaz Cooper
      Seems some readers are getting confused with what the OP is stating

      Forget being an Amazon Affiliate as that is not what the OP is talking about

      As an AMAZON CUSTOMER if you purchase something from Amazon and have it delivered to your home in CA you will not of paid sales tax since Amazon does not collect CA sales tax.

      The OP is saying the state will require to to pay sales tax on those items and are gonna estimate what they think you owe them, then get your bank to report on you without telling you and then garnish your account for whatever sales tax they think you owe them

      Nothing to do with being an Amazon Affiliate but an Amazon customer

      Kickin it on Amazon

      Gaz Cooper
      Amz Training Academy
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  • Profile picture of the author b1833
    California is only the first state.. Others will follow.
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    • Profile picture of the author kindsvater
      Originally Posted by b1833 View Post

      California is only the first state.. Others will follow.
      Yep. But also realize California is already aggressive about pursuing anyone owing the state, wherever they live.

      This law is NOT limited to California residents but targets any financial institution doing business in the state.

      Example: if you live in North Carolina, but owe the State of California for some reason, and have an account with Bank of America, since BOFA does business in California it is supposed to turn over your North Carolina address and North Carolina bank account information.

      You can expect that California will then take your money.

      If you fled California to circumvent the Amazon tax law you're electronically getting pulled back in.

      Virtually everyone is at risk. A CA Franchise Tax Board report says a few years ago it sent 3.6 million notices for people to pay their owed use taxes, and received 322 responses.

      .
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  • Profile picture of the author timpears
    Originally Posted by kindsvater View Post

    SB 86, which was signed into law:

    1 - Allows California to take your reported income and apply an estimate of how much sales tax should have been paid but was not (by companies such as Amazon), and thus how much use tax you need to pay.

    This will be on tax returns that all California residents have to sign under penalty of perjury.

    Expect major complaints against Amazon as Californians are suddenly socked with this tax.

    You either have to pay the amount California estimates you owe, or be able to prove you owe a different amount.


    2 - If you owe any California tax (such as the sales taxes Amazon did not pay), there is a new tax code (section 19266) which lets the state compile an electronic list of taxpayers owing money.

    Every financial institution in California must match the list quarterly with its records, and send to California what it wants to know about you. This includes your name, address, tax id number, bank account number, etc.

    You're gonna love this - 19266(d) PROHIBITS your bank from telling you that your financial records are being sent to the state.

    (This is to prevent you from emptying out your account before the state can grab it.)

    Since the amount is owed, the state is authorized to simply seize the money from your bank account.
    So if I am reading this right, you are guilty prior to any trial. Do I have that right?

    I know The Constitution is not regarded as the highest law of the land any more, but I do believe that this document forbids such action. It is a good job that I don't live in California any more as it would seem that i would be headed for jail time. I would be dammed if I would put up with this crap. It is time people stood up to states trampling on their rights.
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    Tim Pears

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    • Profile picture of the author SuResearcher
      Originally Posted by timpears View Post

      So if I am reading this right, you are guilty prior to any trial. Do I have that right?
      Per the bill you are a delinquent tax debtor if your bill "remains unpaid after 30 days from demand for payment by the Franchise Tax Board, and the person is not making current timely installment payments on the liability"

      And they are going after financial information only of delinquent tax debtors.

      (Except in cases where the financial institutions do not have the technical ability to set up a data matching system. In this case the financial institution can send relevant information about all account holders and the FTB will do the matching!)
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  • Profile picture of the author Mike Hill
    Wow, classic... They are making it so confusing on top of the confusion already about doing your taxes that it will be impossible to defend against "allegations" the state makes against anyone.

    Like I said before, the US tax system is so confusing and setup in such a way to create confusion so it's next to impossible to refute claims against you and win.

    Don't believe me? Take your taxes to the IRS and get 5 different agents to do your taxes. What you will get are 5 different tax return outcomes.
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  • Profile picture of the author CMartin
    Originally Posted by kindsvater View Post

    1 - Allows California to take your reported income and apply an estimate of how much sales tax should have been paid but was not (by companies such as Amazon), and thus how much use tax you need to pay.

    You either have to pay the amount California estimates you owe, or be able to prove you owe a different amount
    How will they know who purchased something from, for example, Amazon?

    Let me guess... they can't, so they will apply an estimate to *every* resident? What a mess!


    And how people will prove they owe a different amount or that they don't owe anything? By showing all their CC transactions or saying... hey... I don't use Internet or never purchased anything from Amazon?


    2 - If you owe any California tax (such as the sales taxes Amazon did not pay), there is a new tax code (section 19266) which lets the state compile an electronic list of taxpayers owing money.

    You're gonna love this - 19266(d) PROHIBITS your bank from telling you that your financial records are being sent to the state.

    Since the amount is owed, the state is authorized to simply seize the money from your bank account.
    So, if they apply the tax to every resident, they will have not only the financial records from everyone but also the ability to get the money from their accounts to pay the tax and without their previous knowledge.

    Yikes!

    ...

    If all the above is correct, then CA residents are so scr**ed - those politicians will not stop there...

    Carlos
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