What California's Retroactive Sales Tax Means to Online and Out-of-State AV Retailers and Consumers Alike

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Interesting questions now arise around the vibrant, nichy world of private party audio sales. As much as it may anger some audiophile manufacturers - Audiogon.com brokers or facilitates more high end audio sales than all of the specialty retailers combined in any given month. Does someone who buys a pair of used, out-of-state Wilson Audio WATT Puppy 5.1's have to pay sales tax on them? It looks like the state is saying "yes" just as they would if you bought a used Porsche 911 and tried to register in the state. They want their money and they aren't messing around.

With sales tax close to 10 percent in certain parts of California (a state whose economy would make it the seventh largest nation in the world in terms of tax revenue) - will people buy local instead of buying online with that nearly 10 percent price cut seemingly gone? California retailers sure hope so, as does the state. The online retailers known for their low prices and Free Shipping will have to potentially cut even deeper into their margins to make an online sale out of state.

Another option is for companies and consumers alike to play "audit roulette" with the state tax board. As the nickname implies - that is a risky proposition, as getting caught, you will not only owe the taxes but you will also owe steep penalties for trying to get around the system. Consumers and private party resellers could try to fake invoices to show the sales for lower amounts - which is also potentially risky but is not unheard of, as when cars are sold on the used market.

At the end of the day, it's hard to beat City Hall or in this case Sacramento as they want/need to get paid. It's easy to see the potential effects of this fair use tax for both positive and negative results. If home theater and audiophile consumers bought more locally - there would be more business done in the state. There would be more dealers looking to sell a more diverse amount of products and beyond. With nearly 10 percent tax on items ranging from a new plasma to a pair of hot new speakers and everything in between that we might want to own - making a big investment in our home theater system just got about 10 percent more expensive. There is only so much money to spend and if the state is taking a bigger cut, wouldn't that make the sale smaller?

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