SingerLewak Tax Brief

On September 23, 2011,
California Governor Jerry Brown signed Assembly Bill ("AB") 155 into law, which imposes a one-year moratorium on the state's "Amazon" Law enacted earlier this year. The new law, effective immediately, pushes the date on which on-line retailers must begin collecting sales tax back to September 2012.

The “Amazon” Law was originally enacted on June 29, 2011 as part of the 2011-12 State Budget Act (A.B. 28x), which revised California (“CA”) Sales and Use tax nexus provisions and expanded the sales and use tax obligations of out-of-state on-line retailers to include collecting and remitting taxes on the sales of tangible personal property to California residents beginning on July 1, 2011.

Implications for Remote Retailers
Unless the law is ruled unconstitutional or federal legislation is introduced which prohibits a state from imposing a collection obligation, companies like Amazon.com or other out-of-state on-line retailers, which rely on affiliate associate programs, will be required to collect and remit Sales and Use tax starting September 2012.

California New Affiliate Nexus Law
Prior to the moratorium, the law required out-of-state on-line retailers who (1) have cumulative sales greater than $500,000 worth of tangible personal property to CA residents within the prior 12-month period and (2) engage in business in CA through the use of affiliate advertising agreements that have generated sales in excess of $10,000 in the last 12 months, to collect and remit sales and use tax on sales made within California.

An affiliate is a person who, directly or indirectly, refers and solicits potential purchases of tangible personal property to the on-line retailer in California through the use of internet-based links, websites, flyers, newsletters, telephone calls, blogs, electronic mail, social networking sites, or other means.

If you are an out–of-state remote retailer and believe your business activities fall within the scope of the new Amazon law, please do not hesitate to contact us so that our State and Local Tax Team may assist you in formulating immediate and long-term solutions for your business, as well as, assist in determining whether exemptions might apply.

The City of Los Angeles has enacted a new Voluntary Disclosure Program ("VDA"), which provides penalty relief for qualified taxpayers who have not registered with the City to report and remit their LA City Business tax. The program becomes effective on October 4, 2011.

Qualifying taxpayers who participate in the program may abate applicable penalties, but not, interest on their delinquent Business Tax liabilities. Taxpayers may also be eligible for reduced look-back periods, limiting the taxpayer's overall tax exposure.

A "qualifying taxpayer"" must meet all of the following criteria to be eligible for the VDA program.

Engaged in business in the City of Los Angeles

Have not previously filed an application for a LA business tax registration certificate or renewal form(s)

Have not been previously contacted by the City regarding delinquent tax liabilities and is not currently under audit or otherwise contesting such liabilities

Voluntarily files an application for business tax registration certificate or renewal form(s) with the city for all years for which taxpayer was engaged in business in Los Angeles

Cooperates with an investigation of the taxes at issues in the VDA and provide all books and records requested

Failure to timely file application for business tax registration certificate or renewal form(s) or to pay taxes was due to reasonable cause and was not due to intentional disregard of the law or fraud or an intent to evade the provisions of the city code

The VDA contains such terms and conditions as are necessary to effectuate the VDA program

During the first year (12 months) of the program, qualifying taxpayers will only be assessed and liable for back taxes for the prior three years, as opposed to the normal eight-year limitation period. However, after the first year of the program, the assessment period will increase to five years

If you conduct business within the City of Los Angeles, and have not registered for the City Business Tax, please contact one of our professionals in the State and Local Tax Practice to determine if you may be liable for such taxes, and whether you qualify for the VDA program.

As always, please call if you would like to discuss any of these items further.
Your Tax Partners,

Mark G. Cook, Partner Steven J. Cupingood, Partner Dan B. Faulk, Partner Richard A. Linder, Partner	Donald G. Leve, Partner David Neighbors, Partner Todd Northrup, Partner Javier Ramirez, Partner	Thomas E. Wendler, Partner Jon Widdowson, Partner Michael Wu, Partner
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