State lawmakers approve online sales tax

One of the more intriguing pieces of the last-minute budget approved by California legislators is an online sales tax, a controversial and previously failed effort to tax purchases from online retailers.

Its sponsors say the tax would bring in an estimated $200 million a year, a relative drop in the bucket but still a tantalizing chunk of change for a state whose finances are in utter turmoil. For consumers, it would mean they can't avoid sales tax by buying online. The proposed tax, which has been sought several times before in California and rejected, is part of legislation passed Wednesday by the Senate and Assembly and now heading to Gov. Jerry Brown. Under federal law, states can tax sales only if the seller has a physical presence in the state. The California bill seeks to get past that issue by letting the state tax board collect from any retailer with a so-called business "nexus" or connection with an affiliate inside California. Supporters say it would make the tax code more fair, forcing Internet retailers to collect taxes just as brick-and-mortar stores already do. "We're finally on the way to creating a level playing field for California companies," said Sen. Loni Hancock, D-Berkeley, author of one of the three bills that were merged into the budget proposal. "All in-state businesses already collect and remit taxes, so those that do not -- like Amazon, Overstock and others -- have an unfair advantage." Opponents and some tax-reform groups across the country insist the proposed law is unconstitutional and would lead California to the same disappointment experienced by the handful of other states that have enacted similar legislation.