Pool and spa retailers across California are praising a new law aimed at promoting equality with online merchants and pulling in revenue for the state.
The legislation, which took effect in late June, requires that certain retailers based outside California collect sales tax on goods sold to California consumers. It applies only to those that have sold more than $500,000 worth of products in California over the previous 12 months.
Expected to raise approximately $200 million annually for the cash-strapped state, it was applauded by dealers throughout the industry.
“Sometimes I can match [the online] prices and sometimes I can’t,” said Erik Casey, owner of Joanne’s Pool & Spa Supply in Northridge, Calif. “But when they don’t charge sales tax, it’s almost impossible, so this is definitely a good thing.”
Retailers such as Casey report spending countless hours advising potential customers about equipment, parts or chemicals, only to see them make their purchase online, at sites like Amazon.com, for less. The latest requirement lessens one of the Internet’s big advantages, particularly on larger-ticket items, he said.
However, the new measure isn’t without controversy.
According to federal statute, Internet retailers must collect state sales tax only if they have a significant physical presence in that state. At issue is whether Amazon’s affiliates, as well as subsidiary businesses in San Francisco, Orange County and elsewhere, constitute a physical presence.
In response to the new law, Amazon recently terminated relationships with thousands of those in-state affiliates, or Websites that refer visitors to the megaretailer’s products. Amazon officials also have filed a petition for a ballot initiative in 2012 to repeal the law, hoping voters will strike it down.
However, supporters of the legislation, including the California Small Business Association, continued to defend the measure.
“Our goal is to make sure small business has a level playing field,” said CSBA President Betty Jo Toccoli.
At Herb’s Pool Service in the Bay area, many products are priced comparably with those online. Still, sales of items such as filters, pumps and heaters pose a challenge, especially when state and local sales taxes can reach 10 percent in certain areas.
“In some cases we just can’t be competitive with what they’re selling it at [online],” said sales and marketing manager Laura Minert. “So we sell them on things like installation, service or warranty.
“It may be as much as a $200 difference between our price and the Internet,” she added. “And as a percentage, the tax on that can be huge. So anytime they can help even that out, I’m in favor if it.”