I don't know about California; but here in Virginia you are
required to pay the sales taxes on mail order items when you file
your income taxes.
Yes, in California you are legally required to pay the sales tax on
items purchased from out of state retailers but which were shipped
to California. It's called a "use tax", and it's exactly the same
as the state sales tax. (7.5% or so last time I checked.) Nobody
ever pays the use tax, and the state tax authorities almost never
enforce the law, but it does exist.
I'll leave aside the whole issue of whether avoiding taxes is a
good or bad idea, and also the issue of whether we get the
politicians we deserve.
But I don't think anyone would disagree that the government
shouldn't have policies or practices that favor certain businesses
over others. (This, of course, happens all the time, but that
doesn't make it a good idea.) It's simply unfair that Chip's store
is forced to charge and collect sales tax and B&H is not. It's a
terrible competitive burden for Chip, and it means Chip has a
harder time making a living, paying his employees, and creating
jobs in his local community. (Note that I mean no criticism of B&H
in the above example. Obviously, B&H didn't create this situation,
and they're just doing business aggressively in the environment
they find themselves in. Nothing wrong with that.)
I used the term "government" in a slippery way in the previous
paragraph. I did so on purpose because it gets to the root of the
problem. State governments want to collect taxes on mail order and
Internet sales, and they do have the authority to require their
citizens to pay the tax. But they don't have the authority to make
out-of-state retailers collect the tax and send it to them. Therein
lies the rub. So they pass completely toothless "use tax" laws,
then don't enforce them, and local in-state retailers (who can be
and are forced to collect sales taxes) end up with an unfair
competitive burden. The federal government wants no part of trying
to collect or enforce sales taxes for 50 different states (and the
Constitution might not allow it anyway), so nobody addresses the
problem.
This is why the moratorium on Internet sales taxes is a
fundamentally unfair and stupid policy. It favors certain retailers
over others based on the mechanism by which they sell their
products. It's totally discriminatory towards locally owned and
operated businesses, and, because those businesses provide the vast
majority of jobs and economic activity in this country, it's a
stupid economic policy. All the blather from Internet retailers
about how collecting sales tax would be too much of a burden on a
fledgling industry is self-serving nonsense designed to camouflage
the oldest scam in business: getting special treatment from the
government, so you don't have to actually compete in a free and
fair marketplace. And how in the world does a behemoth like
Amazon.com cast itself as the underdog in a fragile and fledgling
industry whose very existence is threatened if it had to collect
state sales taxes like the corner bookstore owned by your neighbors
who are trying to sell enough books every month to pay for their
kids' braces.
Okay, I'm done ranting now.
