We tested for browser compatibility before attempting to preload. Explosive growth has occurred in the electronic commerce market. Although both the federal and state governments have instituted moratoriums on new Internet taxes, states continue to apply their existing sales and use tax laws to transactions conducted over the Internet. While most retailers are aware of the basic sales and use tax consequences associated with the sale of goods over the Internet, many have not considered the tax consequences of giving away tangible property or selling goods substantially below cost. This article summarizes California sales and use tax law as applied to Internet businesses and then examines in detail five scenarios concerning gifts and the sale of goods substantially below cost.
Many companies utilize the Internet to sell products.
As an incentive for customers to visit their websites, companies often promote products by giving samples away or by selling them at a deep discount. The California sales and use tax consequences associated with giving property away or selling goods substantially below cost are substantially different from the basic sales and use tax rules set forth below. Summary of Basic Sales And Use Tax Rules under California Law California has not implemented special sales and use tax rules which address selling goods substantially below cost over the Internet. The existing California sales and use tax rules generally operate as follows. When an Internet company with an inventory of products in California sells a tangible product to a consumer in California, the company collects sales tax from the consumer.