Like the rest of the state, Trinity County residents who shop online are finding that sales tax is now added to the bottom line.
The tax has been applied to online out-of-state retailers since April as a result of AB 147, which was passed by the state Legislature and signed by Gov. Gavin Newsom. Although the new rules for out-of-state retailers went into effect in April, the requirements for marketplace facilitators such as Amazon went into effect in October.
The tax is now collected by Internet sellers doing more than $500,000 in sales in the state annually, even if that business doesn’t have a physical presence in the state.
Customers in each county pay the same tax as they would for items bought in person locally. The amount is 7.25 percent here in Trinity County, and that tax goes to the state to be distributed as follows: The lion’s share — 6 percent — is retained by the state although the state provides a small amount of that to local jurisdictions for public safety. Of the other 1.25 percent, 1 percent goes to the county’s general fund, and 0.25 percent goes to the local transportation fund.
Last year, before AB 147 went into effect, the total sales tax to Trinity County was $1,125,684, plus $637,098 for public safety.
Neither the state agency that collects the tax, the California Department of Tax and Fee Administration (CDTFA), nor the county have hard figures as to how much additional tax money this will bring to the county. Trinity County Auditor Angela Bickle said she’s not expecting a lot.
She said an example posted by CDTFA for the 2009/10 fiscal year indicated a gap between total sales and the amount distributed to the counties of about 4 percent. So, if that example is correct, she said, “you’re only talking like $45,000.”
There is also the question of whether residents change their buying habits.
“Are people going to decrease their online purchases now that they are being taxed?” she asked.
CDTFA had no estimate regarding Trinity County’s portion, responding to a query from the Journal that out-of-state retailers that now must collect and pay a tax as a result of AB 147 will need to report their taxable sales. CDTFA will allocate the local tax to jurisdictions based on the amounts reported.
“We have no way of estimating in advance additional local sales taxes that may be received by jurisdictions as a result of AB 147,” CDTFA staff said in an email.
Regarding how the additional money will be used by Trinity County, CAO Richard Kuhns said the money goes to the general fund and will be used in the 2020/2021 budget.
“The budget process begins in March and we will determine during that process the best use of the funds. We must meet our mandates first, then work out from there,” Kuhns said. “I believe with the cost of the jail and other projects we have currently, it is very likely this funding could go to offset the additional costs.”
But he reiterrated that these decisions will be made at budget time.
The state’s AB 147 followed a landmark U.S. Supreme Court decision, South Dakota v. Wayfair, in 2018. Since that decision, most states enacted regulations and statutes to collect the tax from remote sellers. California’s AB 147 was authored by Assembly Member Autumn Burke, with principal co-author Mike McGuire and sponsor State Treasurer Fiona Ma.
According to the League of California Cities, the effect in California isn’t as great as some states because California’s large size means it is more likely that online businesses already had a physical presence and were therefore already collecting and remitting California sales and use taxes.
“Nevertheless, estimates are that between $1.0 and $1.7 billion of California sales and use taxes went unpaid in 2017,” according to the league.
Regarding sales tax in general, the 1.25 percent to counties results from the Bradley-Burns Uniform Local Sales and Use Tax Law. Some jurisdictions have added on additional sales taxes. So far Trinity County isn’t one of them, although the possibility of seeking voter approval for an increase has come up at times.