This month a new hope was felt by Mom and Pop, Brick and Mortar stores across California(1). Finally, online sales in California will be subject to the very high sales tax rates that those of us in the real world are obligated to collect. Why am I celebrating? Well because in a free society all the joys and burdens of the tax code ought to be felt by everyone, equally.
California is going to be the 30th state to insist on the need for online retailers to collect sales tax (2). Starting this month, companies selling product online are now required to charge you if you live in the state. It might sound like common sense, but for too many years, the online retailers were able to cheat the system and not collect taxes. While customers felt like they were gaining by saving, the reality was that many real, brick-in-mortar stores were forced to either downsize or close, because they couldn't compete against such an unfair tax disadvantage.
Watch your local merchants in the next few years. I predict you will begin to see once bare shelves become more filled. Maybe you will begin to see higher-end inventory that you typically don't see. With the sales tax no longer a weapon of the online retail space, the local merchants have an opportunity to score some wins and move forward.
Now just because I'm happy that all online sales are being taxed, doesn't mean that I am happy with the ridiculously high rate! According to the Tax Foundation (3), California ranks 49th for the worst sales tax in the nation. The only state worse is Louisiana. California has been a fiscal nightmare for a long time, and while I'm sure the Governor is looking forward to the new revenues from online sales, the only way to save the states budget is to cut programs and as much non-essential fat as possible. If Governor Newsome really wanted to save his economy, he would announce a plan to lower the state sales tax from the current 7.5, to 6 % With so many more residents now paying sales tax, our state government ought to be able to function on a 6% tax rate, just like the states of Texas and Florida somehow manage to.
Yes I know online shopping probably felt swell, saving 8 and a half percent by avoiding the local store and instead clicking a mouse or swiping their finger on a phone, but imagine what would happen to our community if every single person shopped online? Over the years, by running commercials on stations like this one, we merchants have run Radio Spots advocating for the need to buy local, the importance of keeping the money working within the community. While that messaging has done some good, I'm excited to see the market correction that is soon to happen, as the playing field is now morally and ethically leveled.