How California’s newly created tax agency could bankrupt small businesses across the country

Steven GreenhutBy Steven Greenhut, The American Spectator | Those of us who live in California are used to the state’s aggressive tax-collection policies. Despite record-setting budgets, the state never has enough revenue to fund all the programs it wants to create or expand so the tax authorities have to shake every last dime out of residents’ pockets. But now, thanks to confusion over how to collect online sales taxes, California’s tax-collection agency may be coming for you — even if you sell a few items from your kitchen table in Kansas.

The newly created California Department of Tax and Fee Administration (CDTFA) has been sending collection letters to small businesses that sell products via online retail platforms such as Fulfillment by Amazon. The agency claims that such third-party sellers owe eight years of back taxes because they are considered to have a physical presence in the Golden State. The agency threatens tens of thousands of dollars in fines and imprisonment of up to three years.

It’s a frightening proposition. As California Treasurer Fiona Ma noted in a recent letter to Gov. Gavin Newsom, she’s heard from a Washington state third-party seller who is “distraught and frightened” after receiving a letter from California telling her that she’s “facing tens of thousands of dollars in back taxes, penalties and interest” — something that “will force us out of business and into bankruptcy.” The seller has complied with California tax rules and signed up for a California business license, but now our state wants uncollected sales taxes going back eight years.

How can a Washington business potentially be forced into bankruptcy by Sacramento taxing authorities?

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