I was reading the backlog of news the other day and I stumbled on a surprisingly short-sighted bill which is equivalent to the Warriors signing Maggette in a panic move after Baron skipped town.

CA Bill 178 is authored by Assembly Members Nancy Skinner (D) and Charles Calderon (D). The bill adds this paragraph into the Revenue and Taxation Code:

(5) Any retailer entering into an agreement with a resident of this state under which the resident, for a commission or other consideration, directly or indirectly refers potential customers of tangible personal property, whether by a link or an Internet Web site or otherwise, to the retailer, if the cumulative gross receipts or sales price from sales by the retailer to customers in this state who are referred pursuant to these agreements is in excess of ten thousand dollars ($10,000) during the preceding four calendar quarterly periods. This paragraph shall not apply if the retailer can demonstrate that the resident with whom the retailer has an agreement did not engage in referrals in the state on behalf of the retailer that would satisfy the requirements of the commerce clause of the United States Constitution during the four quarterly periods in question.

After a quick skim, it looks like the state wants to apply sales tax to transactions made between online retailers and the local populace on the condition that the retailer has made more than $10,000 in sales in California in the past year. These retailers currently do not charge sales taxes in California because they do not have a physical presence in the state. That sounds reasonable, right? They do business here, we tax them. It’s the American way.

But, if you were to read the bill more carefully, you would see a major blunder on the part of Assembly members Skinner and Calderon. There is a loophole in the text which allows retailers to sell to California tax-free and those that get burned again are the residents of California.
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