California Begins Collecting Sales Tax On Online Purchases
(KPIX 5) -- A new California law kicked in Tuesday compelling online retailers add state sales tax to products being shipped to California.
Beginning April 1, all out-of-state retailers must begin collecting the sales tax, even if the retailer does not have a physical presence in the state.
In the early 2000s, shoppers quickly discovered they were not charged tax for purchases from online merchants that did not have a brick-and-mortar store in the state. As a result, online shopping boomed.
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In 2011, the tax law changed to require companies with in-state affiliates to begin collecting sales tax. The change affected Amazon in particular, since the company had been operating smaller divisions in California, like its R&D arm Lab126 in Cupertino, for years.
Starting April 1, any online retailer that has more than 200 transactions, or more than $100,000 in sales per year in California must collect sales tax.
The new law is expected to generate $544 million in the first fiscal year.
Two weeks ahead of the April 1 deadline, New York based B&H Photo, one of the country's largest online photography equipment retailers, sent an email reminding customers that "B&H will begin to collect sales tax on shipments to California on April 1st." B&H is not a chain and only has one location in New York City.
Nate Yang, a photographer based in San Francisco, rushed to beat the deadline, and spent $3,685 on a new camera and other accessories from B&H, but paid nothing in sales tax, and estimates he saved about $280.
"That's a chunk of change," said Yang, "The amount that I was purchasing, it's a significant cost difference."
Terry Shuchat, former co-owner of Keeble and Shuchat Photography in Palo Alto, closed his store in 2016, amidst the rise of camera phones, and competition from online retailers who did not collect sales tax.
Shuchat says would-be customers would often come in to sample the cameras, and then go home and purchase them online. Shuchat, 78, believes his store would still be in business had the new law gone into effect earlier, and that it will be a boost to mom and pop businesses.
"It's leveling the playing field. Finally, the state has recognized the amount of business they were losing and how it's affected small retail. I mean retail is disappearing, and I don't think it's ever gonna come back," said Shuchat.
