Democratic Assembly member Nancy Skinner says retailers with physical stores in California have to charge sales tax, even if they're selling online. But online-only retailers don't, even if they have in-state affiliates that will link to or recommend their merchandise.

"It doesn't make sense to have these out of state retailers who have annexes in California to reap the benefits of our large consumer base without providing the state and our communities the income that they're rightfully owed."

Skinner says the additional sales tax would bring in between 250 and 500 million dollars for the state. But Jonathon Johnson, Overstock.com's president says this legislation would hurt California's economy. 

"Companies like overstock are likely to terminate their relationship with all these small businesses that are in California if this bill is passed. That means business goes away, income goes away, income tax goes away." 

Johnson says if the bill is passed, Overstock.com may take legal action. He says it's unconstitutional for California to force an out of state retailer to act as a tax collector.