California ~ Sales and Use Tax: Attorney General Grants Title and Summary to Referendum Against Click-Through Nexus Law

California Attorney General Kamala Harris has issued and delivered to Secretary of State Debra Bowen a title and summary for a proposed statewide referendum to overturn the recently enacted click-through nexus law, A.B.X1 28, for sales and use tax purposes. (TAXDAY, 2011/07/05, S.1)

Title and Summary of Referendum

The attorney general prepared the following title and summary of the chief purpose and points of the proposed measure: “Referendum To Overturn Law Requiring Internet Retailers to Collect Same Sales or Use Taxes As Other Retailers. If signed by the required number of registered voters and filed with the Secretary of State, this petition will place on the statewide ballot a challenge to an existing state law. The law must be approved by voters at the next statewide election to remain in effect. The law expands the definition of retailers considered “engaged in business” in California to include certain Internet retailers selling to California consumers, so that out-of-state Internet retailers also collect existing sales or use taxes.” Referendum 1489 (11-0019) is now cleared for circulation, so the proponent of the referendum, Charles Halnan, may begin to collect signatures. The circulation deadline is September 27, 2011.

Referendum Process

The referendum process in California provides that electors have the power to approve or reject statutes or parts of statutes, with certain exceptions. Referenda can qualify for the statewide ballot up to 31 days before an election, and a proponent has only 90 days from the date of the enactment of a bill to request and receive a title and summary from the attorney general, print petitions, gather the required number of valid signatures, and file the petitions with county elections officials. The petitions must be signed by registered voters in an amount equal to 5% of the votes cast for all candidates for governor at the last gubernatorial election. The total number of signatures required is 504,760. Once petitions are filed, county elections officials have eight working days to determine a raw count of the signatures submitted and report their findings to the secretary of state. Once the statewide total reaches at least 100% of the required amount of signatures (504,760), the secretary of state directs the counties to begin a random sample verification of signatures, which must be completed within 30 working days. If the statewide random sample total projects more than 110% of the required amount of signatures (555,237), the referendum qualifies for the ballot. If the statewide total is less than 95% of the required amount of signatures (479,522), the referendum fails to qualify for the ballot. If the statewide total falls between 95% and 110%, counties are required to perform a full check of signatures and report their results to the secretary within 30 working days. Once the statewide full count total reaches 100% of the required amount of signatures, the referendum qualifies for the ballot. Once on the ballot, the law is repealed if voters cast more “no” votes than “yes” votes on the referendum.

BOE Response

California State Board of Equalization (BOE) Chairman Jerome Horton, in response to the issuance by the attorney general of the title and summary to the proposed referendum against A.B.X1 28 submitted by Amazon, stated that the battle has begun between out-of-state retailers that prefer to skirt the law rather than abide by California’s use tax laws and those businesses who comply with the tax laws, employ Californians, and contribute to the well-being of California’s essential services. The chairman said that the issue is one of equity and fairness, whether out-of-state companies are obligated to pay their fair share and contribute to the essential services of California or exploit California’s consumer market without contributing to the state’s infrastructure. The chairman stated that non-California companies that currently fail to comply with tax laws cost California approximately $12.5 billion in sales, $1.1 billion in use taxes, and hundreds of millions in related taxes, which is equal to a loss of tens of thousands of jobs for Californians and millions in needed revenues for public safety, education, and transportation.

Press Release, Office of the California Attorney General, July 18, 2011;Referendum, Initiative and Referendum Qualification Status, California Secretary of State, July 18, 2011; News Release 83-11-H,

California State Board of Equalization, July 18, 2011

AUTHOR

Wolters Kluwer Tax and Accounting

Wolters Kluwer Tax and Accounting is a leading provider of software solutions and local expertise that helps tax, accounting, and audit professionals research and navigate complex regulations, comply with legislation, manage their businesses and advise clients with speed, accuracy and efficiency. Wolters Kluwer Tax and Accounting is part of Wolters Kluwer N.V. (AEX: WKL), a global leader in information services and solutions for professionals in the health, tax and accounting, risk and compliance, finance and legal sectors. We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with specialized technology and services. Wolters Kluwer reported 2016 annual revenues of €4.3 billion. The company, headquartered in Alphen aan den Rijn, the Netherlands, serves customers in over 180 countries, maintains operations in over 40 countries and employs 19,000 people worldwide. Wolters Kluwer shares are listed on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices. Wolters Kluwer has a sponsored Level 1 American Depositary Receipt program. The ADRs are traded on the over-the-counter market in the U.S. (WTKWY).

All stories by: Wolters Kluwer Tax and Accounting