California governor Gray Davis has vetoed legislation that would have taxed Internet purchases from clicks-and-mortar companies.
Davis said at present, the Internet was less than 10 years old. "Imposing sales taxes on Internet transactions at this point in its young life would send the wrong signal about California's international role as the incubator of the dot-com community."
Businesses with actual physical operations that also operate online would have been required to charge taxes to in-state residents for online transactions. Davis said the legislation would have singled out companies that conduct transactions online to impose tax collection obligations, which, according to California court rulings, they are not required to do.
Bill sponsor, Assemblywoman Carole Migden, a Democrat from San Francisco, said the legislation sought to close a loophole whereby retailers could avoid collecting sales tax by separating online activities, moving them out of state.