California’s small businesses are the heart and soul of our communities. We deserve better than a dead-of-night tax hike.
Thirty years ago, my mom started making beautiful, delicious cakes and cookies that bring a special sweetness to Orange County families’ celebrations. I’ve helped run her dessert business since 2010, and together we’ve grown it from a home-kitchen hobby into a thriving bakery with 26 employees making thousands of hand-decorated treats every month.
Running a successful family business like ours takes incredible hard work and determination. It also takes affordable, effective digital ads. People may think of us as an old-fashioned bakery shop, but the bulk of our sales come from online orders – people who need dozens of cookies for a party, or a custom cake for a milestone event like a graduation. Online orders are critical to our business – and they’re driven by digital ads.
So I’m extremely concerned that California’s Senate recently approved Senate Bill 1327– a 7.25% digital-ads tax – and I hope the state Assembly will reject it in the coming weeks. As a voter, I was disappointed to learn that senators snuck the tax through when no one was looking, after failing to gain support for it back in May. And as a small business owner, I’m really worried. This new tax will hit my business hard.
Stated simply, SB 1327 increases the cost of digital ads. That increased cost will be paid by digital-ad buyers – that is, small businesses like mine. And that puts us in a bind. If we buy fewer ads, we get fewer orders – and our business shrinks. If we buy the same number of ads, we either have to eat the higher cost – which leaves less money to invest in our business and hire employees – or raise our prices. But we can only raise prices so far before customers stop buying from us. We’re already facing dramatic inflation in the price of baking staples, record-high cocoa prices, and soaring labor costs, not to mention competition from grocery and big-box stores with well-known brands and massive advertising budgets. The last thing we need is a tax on another critical component of our business.
Lawmakers also need to understand that for small businesses like mine, digital ads really are essential to success. We can’t afford pricey TV ads – and the fact is, they’re not as effective as digital ads. We need to reach people online, because that’s where they do almost all their shopping, news-reading, and socializing. But unlike competitors like Whole Foods or Ralphs, we can’t afford to show our ads to everyone online. We need to reach local deluxe-dessert shoppers, or out-of-towners looking to send a special-occasion dessert to someone in our area.
Working with digital-ads platforms like Facebook, Google, and Instagram helps us do exactly that, even on a small-business budget. Those companies’ world-class data analytics and ad technologies ensure our ads go to the right audience. Our digital ad partners can even measure our ads’ effectiveness, so if certain ads aren’t working, we can stop running them and put our money into others that are more successful. That helps us make the most sales with the fewest ad dollars, which increases our revenues, decreases our marketing costs, and boosts our bottom line. And that means more time and money for improving our recipes, hiring more people, and growing our business.
I noticed that SB 1327 contains an “urgency clause” that would make it immediately effective if it’s passed. I’d like to close with my own urgent request that California’s Assembly reject SB 1327. Legislators need to take the time to listen to more small business stories like ours. They need to better understand the vital role digital ads play in small businesses success.
Most of all, they need to show some type of curiosity about the enormous consequences of their actions on business owners. California’s small businesses are the heart and soul of our communities. We deserve better than a dead-of-night tax hike.
Philip Gomez is co-owner of Patty’s Cakes and Desserts in Fullerton.
