Michael Wong

California this week took a step closer to collecting tax on sales of consumer goods over the Internet -- a move rejected by its governor in better budgetary times. A tax committee of California's Senate on Wednesday approved two bills that would clear the way for the state to collect sales tax on goods sold by out-of-state vendors to its residents via the Web, a move that could help it recoup an estimated $1.75 billion in lost annual tax revenue. The first Internet tax bill would require California to join a group of 35 states and the District of Columbia, working to help states tax remote sellers, including those that operate online and via mail-order. A second pending tax bill would require retailers with "bricks and mortar" locations in California to collect state sales tax on Internet transactions with California customers through their online subsidiaries and partners. California residents are currently required to report and pay such sales taxes, although few do.

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