How the Jobs Bill's Tax Credit Affects Business

The jobs bill passed by the Senate yesterday is already under fire, with critics claiming the legislation is all talk, and very little action. According to this article from SFGate.com, although the bill is meant to create jobs it is actually more likely to give tax breaks to business owners that are likely to hire new employees anyway. You can find more of their story below:

Desperate to look like they're working on jobs, the Senate passed a bill Wednesday that its backers say could create more than a million new positions by giving employers tax incentives to hire and retain the unemployed.

Critics say the bill is likely to reward employers who would have hired people anyway and will lead to little net increase in employment.

"If demand is not out there, they are not going to hire workers," says Sophia Koropeckyj, a managing director with Moody's Economy.com. "Obama and the Congress are under pressure to do something and this is something."

The bill includes what sponsors call the Hire Now Tax Cut. Under this provision, private-sector employers that hire a "qualified" unemployed person would not have to pay its share of the new worker's Social Security tax - 6.2 percent of wages - for the rest of the year. They say this would give the employer an incentive to hire sooner rather than later.

Continue reading at SF Gate.com…

Internet Tax Avoidance Hurts Jobs, Public

San Francisco Gate author Lenny Goldberg recently published a great article on how the legislatures avoidance of taxing Internet sales is hurting all Californians. Check out a portion of the article below, or you can find the full post here.

The demise of Cody's Books in Berkeley and Stacey's in San Francisco is a symptom of one of the key changes of our new era: the shift to the massive use of Internet sales instead of community businesses.

We are in a difficult period of transition for retailing in general and booksellers in particular. But it's particularly frustrating when the state's tax policies conspire with out-of-state sellers to inflict major damage on local businesses.

State-sanctioned tax avoidance is in fact what has been happening as a result of the failure of the state Legislature and of the state's sales tax agency, the Board of Equalization, to collect taxes on sales into California by companies with substantial presence in the state. Not only is Amazon.com abusing the law with regard to its massive sales into California, but a whole Web-based cottage industry has grown up based heavily on a business model of avoiding sales tax.

The issue has come to a head over a bill by Assemblywoman Nancy Skinner, D-Berkeley, whose legislation, AB178, is really about enforcing the sales tax law, which the Board of Equalization has failed to enforce. It says, simply, that Internet sellers with agents or representatives in the state have presence sufficient for them to be obligated to collect tax on sales to California and send it to the state.

The business model used by Amazon for years, and now by other businesses, is their "affiliate" program, by which thousands of California organizations and individuals solicit sales under a contractual relationship and receive a commission on the sales. Amazon's long-standing approach has been to gain a competitive advantage over other businesses by avoiding the collection of tax.

Founder Jeff Bezos has said he originally wanted to locate in Alameda rather than Seattle but wanted to sell tax-free into the huge California market. And somehow the company has managed to avoid the law that says that if it has representatives in the state - its affiliates - it must collect the tax.

California is not on the cutting edge of this issue. New York passed legislation that serves as the basis for Skinner's bill. Amazon did two things in response: It started collecting the tax from New York purchasers immediately, because it did not want to be liable for the money; and it filed suit. A New York court dismissed the suit, holding that Amazon had a presence in New York, and upheld the state. As a result, a number of states, California included, are attempting to follow the New York law.