California MLM Tax Law – Could Effect ALL of Us! Withholding Tax on Independent Contractors
I usually like to provide some business tips on this blog but I came across this information from numerous sources and I felt it was too important to ignore. I really feel that anyone that’s in business for themselves needs to take action and reply to this. Many times we complain when something has been put into effect but we have the chance right now to make a difference.
The California Assembly passed SB 17 on a majority vote on June 28th 2009 which contains a provision for a 3% withholding tax on independent contractors. If this bill becomes law, and you are in California your company will be required to withhold 3% of your monthly check and send this amount to the State of California.
If this bill is enacted, it will decrease the size of your monthly checks and create substantial administrative burdens and expenses for All MLM Companies. Throughout history, across the country, direct sellers as well as other independent contractors have been exempt from withholding taxes because many of their expenses are deductible. This legislation sets a dangerous precedent that other states and even the Federal Government could follow.
If you share my concerns, please voice your opposition to this bill ASAP by contacting the Governor and Senate President Pro tem Darrell Steinberg and let them know how you feel.
A sample letter appears below for your convenience, but your communication will be most effective if you use your own words. Contact information for the Governor and Senate President also appears below.
Here’s a sample letter if you live in California:
SAMPLE LETTER:
Dear [ ]:
Withholding on independent contractors, like me, a (name of Company) Distributor, would place a large burden on my family. Unfortunately, once again, the California Legislature is considering an independent contractor withholding proposal.
[Tell your personal story in your own words] I have been a (name of Company) Distributor for more than [Insert the number of years you have been working with your company] years. Originally, I enrolled because I liked the products and wanted to earn some additional money. Now my family depends on this extra income to supplement our budget.
I am not opposed to paying my share of taxes, but it makes no sense to me to send the state my money and then have the State send it back to me when I file my tax returns. I need every dollar I make to run my business. I have to pay my business expenses from the commissions I earn. While I of course support the need to pay taxes, withholding up front on taxes I may never really owe will cause severe cash flow problems for me. My business is already difficult enough. If you burden us with more administration and paper work it only serves to make the business more difficult and less attractive and therefore it will be more difficult to grow my business.
In the end, the State will not end up with any more money. If you do consider a withholding proposal, I request that you exempt direct selling companies.
Please do not sign any budget resolution that contains independent contractor withholding for direct sellers. It would hurt my family and my business as well as tens of thousands of others in my occupation.
Sincerely,
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