Legislation would reveal true cost of e-commerce tax-sharing deals

Cities like Fresno and Ontario have been courting online retail giants with generous sales-tax rebate programs that return as much as 50 to 80% of the tax to the retailers. Efforts to stop the kickbacks have been unsuccessful (Gov. Gavin Newsom vetoed a bill that would have banned the tax-sharing deals in 2019). Now, a bill authored by Sen. Steve Glazer (D-Orinda) aims to reveal just how much other cities and counties have been shortchanged by these deals.

“This bill, if it passes, is going to reveal the truth about who are the winners and losers,” Glazer said of SB 792.

The deals have brought large distribution centers and jobs to the cities that cut them. Because online retailers can choose where they allocate sales tax revenue, they are able to direct revenue to a single jurisdiction — in this case, the one that makes the deal. Glazer has long argued that e-commerce giants use this as leverage to bilk taxpayers, while also pitting cities against one another.

“These deals siphon money away from cities across the state — including those who struggle economically,” Glazer wrote in a 2019 op-ed. “While cities like Fresno may benefit, towns like Chowchilla and Porterville, only miles away, suffer the impacts of increased warehouse traffic and pollution. Meanwhile, they lose sales tax revenues that could mitigate these effects to neighboring cities that have tax sharing deals. These deals are made without any input from cities’ whose own revenue is being given away.”

For each online sale, SB 792 would require certain retailers to track and report the city or ZIP code where the purchaser resides and include a schedule of gross receipts for each local jurisdiction.

The governments that have cut these deals, ergo Fresno, oppose Glazer’s legislation. The bill is also opposed by the California Retailers Association and the California Taxpayers Association.

Supporters of SB 792 include the League of California Cities and at least 10 municipalities, including Fullerton and Walnut Creek.

Read more about SB 792 at the Sacramento Bee.


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