California Online Tax Bill Could Have Major Implications for Out-Of-State Retailers

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As California continues to grapple with an unprecedented budget crisis, some state lawmakers are drawing notice—and from some constituencies, outrage—for their support of legislation, which, if enacted, would impose an obligation upon all online retailers making sales into California to notify their California customers of their obligation to pay use-tax to California. Assembly Bill 2078 — commonly known as the Online Tax Bill —gained momentum recently when it passed by a 46-28 vote in the Assembly and was referred to the Senate's Committee on Revenue and Taxation.1 With budget projections for the legislation reported between $100 million and $150 million annually2 , and strong support among the Senate majority, passage of AB 2078 is considered likely. If the bill as introduced in the Assembly is passed, it would make California only the second state (after Colorado) to impose a notice requirement on online retailers.

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