tonight. i know how hard it is to work a long day and still come and speak to us. thank you. supervisor mar: -- commissioner o'conner: one final point i wanted to make was connecting this to the legislation we heard earlier from supervisors mirkarimi and fearrell. the mayor was talking about how san francisco can not provide seed money and control how that company grows. but companies want to be here. employees want to live in san francisco. they do not want to live in los gatos and los altos. we have unix will businesses. we have unique restaurants. we have to keep that, or we lose our competitive a vintage.

-- competitive a bandage -- advantage. there are not a lot of small businesses in this area because there are not a lot of employees. this city is unique because of small business. thank you. commissioner clyde: i also want to thank everyone for being here and showing such a great solidarity with this issue and with the small independent stores. the effect of predatory pricing is, and has been demonstrated repeatedly -- one small shops go out of business, then the prices increase and increase. i have some experience with a local safeway that is exponentially higher than other safeway's simply because it does not have any competition in the area at all. this has been happening for years. it continues to happen. there is that time where a

community might enjoy lower prices, and that is great, but once those little shops close, then the price goes to what the market will bear, and prices are often higher. in san francisco, with high incomes and high disposable income in many of our neighborhoods, we know why these companies want to locate in our neighborhoods. we have high disposable income. that would be death for our city. it is not our value. one of our great values is allowing our neighborhoods to design themselves -- to define themselves and change the definitions as they move forward. i have to say i will always stand by a neighborhood that is working this hard to tell us what you would like to see in

your neighborhood. i thank you for that. i have watched other formula retail stores, particularly in the food markets, now triangulating the city. i am concerned with that. i am concerned with our independent groceries, our independent produce markets, and some of the effects of formula retail on them. we will be looking at that as well. for this, thank you very much. president o'brien: i just have a couple of thoughts about it. in a previous career, i did a lot of traveling. i was pretty much in every city in the union. i am an immigrant, but i never met a fellow american who had been to as many cities as i have. i installed telecommunications networks.

it is true that people around the country and around the world will tell you that san francisco does have something that is unique. if you go to a midwest city are some of the other cities that don't have the aggressive control that san francisco does about, "wait a minute. let's think about what is going on." these cities, you drive from the airport downtown, and it is mcdonald's and kentucky fried chicken. it is hard not to be unimpressed by it. that is definitely something that is precious to san franciscans. you probably have to be some consistent to really appreciate that, but everyone sees it when they come here. they may not see what it takes to keep it that way. i am behind that wholeheartedly. we are a small business commission. it is probably fair to say we are going to have a slight bias

to the small business people. that is why this commission was set up, was to give voice to the small business community. it is hard to ignore that mandate, if you will. i am concerned about the approach of an outright ban. i kind of like supervisor mar and others considering this -- commissioner riley talked about moving forward. i don't like controls like that. i don't know if it is going to get all the way to the supreme court and through all the court agencies to find out if it is legal or not. i don't think we're going to turn this down because we are afraid it's not legal. i think will take our chances on that. but outright bans -- there is a

benefit to economies of scale, whether we like to admit it or not. there is a benefit to economies of scale to the consumer. we need to find a way to balance the best of both worlds, preserving that diversity but benefiting from the economies of scale. we will figure it out, i am sure. we have not done it yet, obviously, but we have to get that. i am not sure an outright ban the -- ben is the way to go. you a prolific in the same problems with other monopolies. people will start running the business casually and not having to compete. maybe less than a drastic approach, but that is not one to stop the supporting this measure. we looked at an ordinance our proposal recently about yellow pages. i got a letter afterwards from a member that support to the

company, if you will, that produces yellow pages, saying, "we would like to have another meeting. it sounds like the people at the meeting were radical environmentalists. we don't think they support the community." i am not a radical environmentalist. they did not get it, as far as i can see. what we are doing is being sympathetic to the situation. there are a lot of people here who have a vested business interest. we are impressed with the presence of people here tonight. i am very impressed by it as a member of another organization. and maybe talk to you guys about how you run this organization and give you some pointers from my organization. probably a lot of the community -- i would like to see more of our reach to people on the streets, to hear the testimony. i think you reflect the

community pretty well. for that reason, it is something i will have to go along with and support this. do we have somebody to make a motion? vice president adams: i move to support the new legislation prohibiting formula retail pet supply stores in the geary boulevard fast food sub- district. president o'brien: all those in favor? anybody opposed? seeing none, the motion carries. [applause] next item, please. >> commissioners, you are now on item 11, discussion of possible action on an sbc resolution supporting a be 153, an act to amend section 62 of three of the president -- of the revenue and taxation code.

presentation by hut landon. you have explanatory documents and a draft resolution. president o'brien: thank you. >> thank you, commissioners, for hearing this. i will try to be brief and give a little history of this. hopefully, i can address questions that i understand some of you may have. in saying to amend the current language -- we prefer the word to clarify. i think one of the things that is really important here is that we are not talking about a tax increase. there is existing tax code, state tax code, that we think right now actually creates a

nexus for companies like amazon and others. the board of equalization disagrees with that. what this seeks to do is clarify the language and make it less of a -- less vague than amazon lawyers have told us it is now. but what this really is about is supporting local businesses like the ones who have heard from tonight, or supporting an out of state giant chain whose business model is based on sales tax avoidance. that is really an important piece of all of this. i hope we will keep this in mind as we talk about all this. there are two ways, basically, that you can create what is called the nexus in the state.

if you have in texas, you are required to collect sales taxes. one of the ways is if you have a physical presence, a store and a website. if you sell something on the website to the customer in california and have a store in california, you have to create sales tax on the online sale as well as in your store. that is pretty straightforward. the other way that in texas is created, according to existing tax code, is if you have people working on your behalf -- sales agents or affiliate's who are driving business, who are, in effect, selling for you on your behalf in the state. amazon has over 10,000 affiliate's in the state driving business to amazon every single day. what ab 153 would do is state

very clearly that those affiliate's relationships, the sales agents for them sun and others, create business in the state and therefore should collect sales tax. amount to briefly explain the notion of the affiliate's and sales agent. there are affiliate's who are, for instance, schools. mice -- my son's school was an amazon affiliate's. they said if we went to the website and bought a copy of the book the fifth grade class was reading, amazon would give them a little kick back. authors do this themselves to sell their books. they send people on their web

sites to amazon and get a commission back. amazon will tell you that those people, sales agents, are creating a link on their web site. amazon -- we could argue that point. there are many other affiliates who have e-mail lists and websites. amazon provides weekly list of specials, just like what you get when stay in your mail from what the market are safe with, the things you get from local stores. emma's unselfish out to their -- amazon sends this out to their affiliates. here is the weekly special. get the deal. and the sun gives them a cut back. that our sales agents, and that are proactively soliciting business.

what nancy skinner path bill says is that kind of action is a nexus, and they have to collect sales tax. in terms of the affiliates, that is the deal. the board equalization says that sales tax revenues lost in the state of california is now $300 billion annually. we have been fighting desperate with the northern california independent booksellers association. we have been fighting this in california for 12 years. amazon have been collecting sales tax in the last decade at, let's say, $200 million a year. we would give them credit for not having sold so much 10 years ago. multiply that by 10 years and it is a lot of money. the advantage that amazon and

the others have over all the businesses to sought in this room, and i want to get back to that, is basically a 10% price cap, 9.75%. off the bat, they get a 10% better deal. this book business, which is why we get involved -- i used to joke that amazon would soon disappear -- would soon be selling lawn furniture. you can buy a lawn furniture now from amazon. home depot told us the no. 1 seller of barbecues in the united states -- home depot -- amazon.com this is a huge competitive disadvantage for california businesses large and small. this is one place where wal- mart, target, and petco are on

the same side with the small businesses. this is about do you support california businesses, their employment, and all the rest, or do you support and out of state e-tailer whose business model is built on tax avoidance. commissioner clyde: thank you for your presentation. and thank you for clarifying many of the questions i have had about this legislation since it was first brought to my attention. but it has been said that the affiliate's will be heard in california, the 10,000 currently selling from amazon. would you respond to that? >> walmart, best buy, home depot, and i think macy's have all offered publicly any

affiliate of amazon who may get fired if this legislation passes -- one of the ways in the sun can avoid this is -- the ways amazon can avoid this is to fire all the affiliates. walmart and best buy have all offered to take those affiliates in. those affiliates can still sell to their customers the same things amazon is selling, through walmart and everyone else. the only difference is sales tax would be collected. commissioner clyde: is that fact that now those affiliates will have to collect sales tax? >> the affiliates will not have to. the companies the represent, whether it is amazon or -- there was a guy who is not connected to amazon.

he is running a photography program. he has a photography store in new york who carries something that no one else carries. by him representing them on his website and letting his california customers know about the store's stuff, he is providing this service. what he is actually doing is allowing the new york store to avoid collecting sales tax in the state of california with those customers. what he says is if they are required to collect sales tax because i am an affiliate, they will just get rid of me and i will have to leave the state. that is potentially the case. however, it is also the case that fireside camera on chestnut street is collecting sales tax and has to compete against the sky. it is flat out unfair. it is a business model. it is an unsustainable business

model. commissioner clyde: i am of the understanding that amazon has come under significant criticism from other corporations for this practice because, as you know, we have serious tax revenue problems and equality issues right now at the state and local level. >> i have heard that. commissioner clyde: there has been quite a bit of corporate criticism of amazon's stance on this taxation issue. thank you. president o'brien: anybody else? just an interesting question for myself. does the reverse happened? the california company's benefit from selling into other states, that are based out of california? >> they do sell into other states. in states where there are such laws, the have to collect sales tax.

there are california companies selling into, say, pennsylvania. the way the law was intended is to have a threshold. the threshold right now is $10,000. it may get a higher. basically, if i have a bookstore and and selling used rare books and sell less than $10,000 worth of books into the state of pennsylvania, i would not be liable for their sales tax as a small business. if i sell more than that into a state, or five or six states, i would be liable to collect sales tax. i think the notion is that once you get to a certain level that is part of the deal. the other thing people say that i have to remind you -- they say it is a burden to collect sales tax. you have to report it. you have to fill out forms. yes. the cost of doing business online. do you want to talk to these

businesses about what they have to do to be in business in san francisco? it is the cost of doing business. if you choose to go on line and sell things, you get the benefit of not having to pay rent. but avoiding sales tax should not be one of the benefits. president o'brien: my personal good instinct is that i do not foresee amazon deciding to pull out of california. would it be too big of a market to get sulky about it? >> that is an argued point. they have done it in other states, but not in other states where they have confessed affiliate's. they did that in north carolina, where they have 12. one of the things this -- the things these affiliates are doing is driving new business to amazon. they are capturing people who are not on amazon now. if you have an account on amazon, you do not have to go to

an affiliate. they are capturing someone who is interested in amazon, even if it is to help their school or church. they go to amazon. they create an account. they give their credit-card number. amazon now has that captured person for the rest of their lives. they can seldom lawn furniture. the affiliates serving as ways to get new people. we will see. amazon may decide that the tax advantage is worth more than the affiliates, but i think it is a risky thing. even if they do get rid of them, those affiliates of other companies that can latch onto and still sell online to people, and we get the sales tax. president o'brien: has there been much of a reach to the affiliates -- much outreach to the affiliates? >> amazon and best buy have

written open letters and there are affiliate networks that have been spoken to. it is actually a very easy process if you are an affiliate. i think some of them are associated with some of these companies anyway. where you buy your flat screen tv does not matter, except for the tax break. president o'brien: thank you. anybody else with any questions? >> richard open it to public comment. -- we should open it to public comment. but i want to make clear that hut is here to provide information. the commission can take this as an informational item.

staff has drafted a resolution, should you want to take action. you can move on the resolution. president o'brien: do we have any public comment? >> i am art swanson, president of the small business network, san francisco. those of you who are familiar with our organization -- we voted unanimously to support this measure. we believe it would even the playing field, a phrase used far too often. however, think about it. all you are asking someone to do is pay tax like the rest of us have to, the rest of the small businesses. there are other precedents for this in other lines of work.

my other day job is in property management. the state of california is now coming after my industry for things along these lines of sending disbursements to out-of- state owners of buildings without withholding some money from them. there is all kind of different ways the state is now looking into capturing money that is actually, like it or not, rightfully theirs. it is a simple reality. it goes along with the thinking in this wonderful meeting all day today about small business and making sure that the opportunities are the same for everybody. i think this falls in the same kind of line with all of that. all everyone is asking for is to be able to play the game the same way. i appreciate all your time. president o'brien: thank you. is there any further public comment? >> stephen cornell.

every group of belong to is for this legislation -- the small business advocates, the small business network. we are all for it. a couple of arguments i have seen on this. one about how hard it is to have all the different tax breaks. i have a small business. i sell two different entities in different counties in california. -- to different entities in different counties in california. it is in my off the shelf software to tommy when to charge -- to tell me how much to charge sales tax in which county. it is very easy. it is not a burden on any business that has a basic computer for retail. this helps level the field. the argument about how many affiliates might be lost -- nobody was there when all the brick and mortar stores went.

how many bookstores have gone down the toilet because of this? tried by an wallpaper now in a store or looking for wallpaper. you cannot find it anywhere. the biggest supplier of barbecues, a basic thing for a lot of hardware stores or home centers -- it is amazon. it is a big deal. a lot of business has been lost on this. thank you. president o'brien: thank you. any further public comment? public comment disclosed. director, as it is now, we approve this legislation we drafted? >> it was initially presented at the retreat and there were some questions the commission had. the commission reviewed it but did not take any action and asked for a full presentation on

the bill at the state before taking action on the resolution. president o'brien: ok. do we want to take a motion to approve it as written? commissioner o'conner: i will make a motion to approve. president o'brien: all those in favor? anybody opposed? seeing none, the motion carries. next item, please. >> thank you. that was a longstanding problem. >> commissioners, you are now on item 12, a presentation on the sfeda by jenny mcnulty, executive director of urban solutions. >> i see we are the only ones left with you. thank you for spending your monday evenings doing this each

month. i am the director of urban solutions. we are one of the nine members of the san francisco economic development alliance. representatives of three of our member organizations are going to share in the public about the work we are doing. just to start us off, i would like to introduce a family g-- emily gasner, executive director of working solutions, and code- share of -- co-chair of sfeda. >> thank you, jenny. i'd like to thank the small business commission for giving us the opportunity to tell you more about the sfeda this evening. we are a coalition of small business assistance organization.