Clarification: The original version of this article was misleading. The State Board of Equalization estimates the total unpaid use tax to be $1.1 billion annually. Use tax due from online purchases is only a portion of what is owed. The governor and legislature have estimated that its provisions will generate $200 million annually for the state.
Last week, Gov. Jerry Brown signed into law AB 155, which requires online shopping sites like Amazon to charge a sales tax on items purchased over the Internet.
The tax won’t be collected until next September, but already the law has sparked concerns. Many students save money on textbooks and other items bought from Amazon, and the prospect of paying more isn’t easy to swallow. Money is hard to come by these days, especially with the high cost of tuition.
But this board believes the benefits of the law will outweigh its tax-heavy downside.
For one thing, Amazon has agreed to hire 10,000 full-time and 25,000 seasonal employees in California by 2015 to improve its quality of service. This will bring much-needed jobs to the state ““ good news for the struggling economy.
Also, while many of these jobs will be blue collar work, some will likely be entry-level business and management positions ““ good news for UCLA’s graduating class.
And while no one enjoys paying added taxes, some of the money collected under the new law will come back to us. The State Board of Equalization estimates the total unpaid use tax to be $1.1 billion annually, $200 million of which is due from online purchases. We might expect at least $36 million of this to be given to the University of California, using 2010-11 budget allocations as a guide.
Of course, that would hardly put a dent in the $500 million cut from state funding to the UC under the governor’s latest budget proposal. So with more tax dollars rolling in, we expect the state will find ways to restore a greater share of the funding it has slashed from higher education. This could involve finding and closing other tax loopholes that large corporations have taken advantage of.
Lastly, the law will help level the playing field for small- to- mid-size businesses that have struggled to compete against the tax-free giant that is Amazon.
One such business is Associated Students UCLA, which has suffered declining textbook sales for years now, in large part because of the lure of online buying. If textbooks on Amazon become more expensive, students will have an added incentive to buy from ASUCLA.
This is good for two reasons. First, if more students purchase textbooks on campus, ASUCLA may be able to charge less for them. Second, profits that ASUCLA makes are invested back into student services like food and events.
This is a golden opportunity for ASUCLA to get back in the game. To better compete, it should explore ways to increase the size of its textbook loan program and expand textbook offerings to include e-books.
Despite the burden, this tax will give the state and our university a much-needed economic boost.
Unsigned editorials represent the majority opinion of the editorial board.