It no longer pays to live in California. When we moved here in 1992, California was a state that was suffering the delayed effects of a terrible recession that the rest of the country had already pulled out of for the most part. But you just knew that it was a great opportunity. The real estate market was a great opportunity. The entrepreneurial spirit was a great opportunity.
Fast Forward to 2011. Everyone, conservatives and liberals alike vacilate between finger pointing and wringing their hands while scratching their heads. What happened?
There is no question that the state of California needs to increase revenues and decrease spending. However, a recent tax bill created to get something for nothing backfired by failing to produce sales tax revenues and serving to decrease the taxable income of certain online businesses.
That bill pretty well eliminates the revenue opportunity for GlamourByLBD.com and other sites like it. Let me explain.
GlamourByLBD is an affiliate marketing site. That means that we partner with hand selected online vendors to recommend products that we like. If you like what we like and you click on the link and buy the product or another product from our vendor, we receive a small commission. We simply recommend products. We are not a dealer or vendor. We do not carry any inventory and we do zero sales transactions. We simply recommend things that we like from companies that we trust and create traffic.
As of July 1st, any link to a California affiliate company will force the supplier to charge California sales tax. Suppose a customer in Florida is reading about a great pair of shoes on GlamourByLBD.com. The shoes are at endless.com, which is NOT a California company. Our devoted reader in Florida purchases the shoes through endless.com and the shoes are delivered to her door in Florida. Because she CLICKED THROUGH a site that is based out of California, endless.com would be required to charge CALIFORNIA sales tax.
Do you think this is generating sales tax for California? No. Because all of the online companies who were not based in California (little companies like Amazon,com) dropped their California affiliates. Not only that, but the INCOME of the affiliates just dropped considerably. No new sales taxes. Reduction in income taxes.
Brilliant, Jerry Brown. Just brilliant.
