California Governor Says No To Internet Taxes

As expected, California Gov. Gray Davis vetoed a bill that would have tacked a 7.25% tax onto Internet sales by merchants who also have brick-and-mortar operations in the state. Davis had made no secret of being "philosophically opposed to Internet taxes," and last year vetoed a similar bill, despite a National Governors Association estimate that an Internet sales tax could bring in $14 million.

The Internet "needs time to mature" as a marketing medium and job creator, Davis told the California assembly, while the bill, AB 2412, "singles out companies that are conducting transactions electronically and attempts to impose tax-collection obligations on them to which, according to California courts, they're not subject."

Bogging the Internet down with taxes at this point in its growth, he maintained, "would send the wrong signal about California's international role as the incubator of the dot-com community."

Davis also signed a bill that creates a California Commission on Tax Policy in the New Economy to further study the taxation issue and develop a long-term strategy.