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An online sales tax measure that for years small business owners across the state have been clamoring for was signed into law by Gov. Gavin Newsom this week. Local merchants hope it’s a step toward a more equitable marketplace.
Newsom’s signing of AB 147 comes on the heels of a U.S. Supreme Court decision, Dakota v. Wayfair, Inc., which authorized states to collect online sales taxes from retailers without a physical presence in their state.
California is now one of 33 states to enact online sales tax collection.
“I had to compete at a disadvantage because out-of-state businesses didn’t have to charge California sales tax which meant they could charge less than me,” said Anthony Mantova, owner of Mantova’s Two Street Music in Eureka. “I’m really happy. For one, it means I can start offering higher-end merchandise online because I don’t have to worry about the 7-to-8-percent disadvantage. Other online retailers can sell something for $2,000 but I have to ask for an extra 8.5-percent.”
The sales tax decision will mean more revenue for the state and it’s been an issue for more than a decade as the number of online sales continued to grow. According to North Coast state Sen. Mike McGuire, chair of the Senate Committee on Governance and Finance, the measure will level the playing field for local retailers.
“This critical legislation removes the competitive advantage online and out-of-state businesses, who did not collect sales tax, had over brick-and-mortar California retailers, who have always collected taxes,” McGuire said in a prepared statement. “Local mom-and-pop businesses across California have been clamoring for relief for years and this legislation levels the playing field and not only implements Wayfair effectively but also fairly.”
With the governor’s signature, AB 147 will take effect immediately.
“It won’t take anything away from our local businesses and anything that help generate revenue for our city, county and state is a good thing,” said Charlotte McDonald, executive director of Eureka Main Street. “It’s kind of nice to see the state do something that doesn’t hurt our small businesses but actually helps them.”
First District Supervisor Rex Bohn echoed those sentiments and pointed out that not only will the measure level the playing field, it’s a reminder to support your local retailers.
“If this will help people realize they get better service and support locally and that buying locally you support your neighbors, if it’s something that can help out local businesses be successful,” Bohn said, “I’m behind it.”