Amazon v. California, Round II

September 6, 2011 -

While Amazon might be on the precipice of usurping legislation passed earlier this year by the state of California with a voter referendum this November, lawmakers are on the attack. The New York Times chronicles the fight going on in California in this article, which is interesting because it pits traditional retail in the state against online retailers. Earlier this year the state passed a law to collect sales tax from any online retailers that have a physical presence within its borders - including resellers and those that earn money from referrals. Amazon, which is headquartered in Seattle, Washington, has no plans to pay its portion of  that sales tax, which the state estimates is around $100 million annually (from all online retailers, not just Amazon).

The big problem for lawmakers is that most online retailers - most notably Amazon - are not playing ball. The company cut its ties to anyone in the state that has a physical address and has argued that its only presence there - a manufacturing facility that builds the Kindle - is not subject to the law because it is not engaged in actual commerce. Further, Amazon easily collected 50,000 signatures it needed to put the whole online sales tax issue on the ballot in November.

This has pissed off more than a few state legislators, who are already trying to pass emergency measures to kill that November vote. The New York Times article notes that Democrats would need at least two Republican votes for their bill to become law. That prospect is a long shot, no matter how they slice it. Meanwhile, Amazon offered to open up distribution centers in the state if California gave them a free pass on the sales tax collection. Governor Jerry Brown and legislators have already said no to that proposal.

But not everything will come up sunshine and roses for Amazon either. Assuming that voters invalidate the sales tax law, powerful lobbyists are waiting to sue Amazon in federal court, such as the California Retailers Association.

The real question is, should voters in the state be forced to pay sales tax on online purchases? Remember in the 90's when you couldn't get a politician to say it was a good idea to tax anything on the Internet? Clearly those days are in the rear-view, but should consumers in California really give a state that continues to mismanage the tax revenue it already receives an additional $100 million to spend?

We don't have answers, just more questions. We’ll continue to follow this story as it develops.

Source: NYT


Comments

Re: Amazon v. California, Round II

Reason Magazine published an article on this topic today. They even proposed a solution to these internet taxation problems:

There are better ways to level the playing field. One solution is for states to cut taxes on in-state vendors. Another option is an “origin-based” tax regime, under which states would exercise their right to tax equally all sales inside their borders, regardless of the buyer’s residence or the ultimate location of consumption. Under that model, all sales would be “sourced” to the seller’s principal place of business and taxed accordingly. This approach is already fairly common. A Washington, D.C., resident who buys a car across the Potomac in Virginia, for instance, is taxed at the origin of sale in Virginia regardless of whether he brings the car back into the District. Each day in America, there are millions of cross-border transactions that are taxed only at the origin of the sale; no questions are asked about where the good will be consumed. We should extend the same principle to cross-border sales involving mail order and the Internet. Such an approach would be good for retailers, good for consumers, and good for federalism.

Re: Amazon v. California, Round II

Reason's "solution" is terrible. Just like Reason (a bastion of right-wing anarcho-libertarianism).

Suggesting California cut taxes on in-state vendors is ludicrous in an essentially bankrupt state. And the "origin-based" tax is questionably constitutional, impossibly difficult to enforce, logistically impossible to coordinate across 50 states individually in a useable and understandable manner that is fair to consumers, and is little more than a trumpeting of the "States Rights uber Alles/Tax Cuts 4 Lyfe cuz taxes r bad" motto Reason swears by. 

Re: Amazon v. California, Round II

How is it ludicrous? It is how brick and mortar already functions. If I cross the border between Oklahoma and Texas and buy something in Texas, I pay the Texas sales tax. The same with an online purchase. Such a solution would be the same for online; If I buy something from Amazon, I get charged the Washington sales tax.

Where ever the company is based, that is the sales tax charged. I don't see how that is hard to work out.

Re: Amazon v. California, Round II

The real question is, should voters in the state be forced to pay sales tax on online purchases?

The answer is, yes. In fact, we are already supposed to be paying the tax value on products purchased out of state. It's called the use tax if I remember correctly. Most people don't pay it and its almost impossible and highly impractical for the government to try and find out who owes how much.

What California is trying to do is hold the online retailers responsible for collecting the taxes that their constituents should have been paying in the first place. Amazon is trying to deny having any presence in the state that would force it to collect sales tax like any other CA retailer would. While its not difficult to get 50,000 idiots to sign a petition for "no new taxes" the fact is, this is a tax that should have been paid already, then maybe the state wouldn't be in as bad a financial problem as it is (it'd still be in debt, but not as much).

The days of free and untaxed internet sales are quickly coming to an end. I'm not saying there's no such thing as a free lunch, it's just that there's no such thing as a free lunch forever. Someone will always try to take their percentage, whether earned or not.

I hate broccoli/ and think it totally sucks/ Why isn't it meat?

Re: Amazon v. California, Round II

I'm completely unsympathetic to California.  They bankrupted their own state with frivolous pet projects like EMA.  Let them clean up their own mess.

Re: Amazon v. California, Round II

Watch them waste millions more fighting Amazon over this and losing like they did with ema. We wouldn't have so many budget problems if they dumped the nanny state routine and stopped figuring for these BS laws. My college receivedal a bill for 1 million dollars, probably to cover part of the state's lawyer fees.

Re: Amazon v. California, Round II

Considering California's proven incompetence with money, I fail to see how collecting more tax is going to help.

Re: Amazon v. California, Round II

Well, California has a bad money situation in the first place... it is one of the only states where the comptroller and governor are elected separately, so neither actually works for the other and bad budgets kinda evolve naturally out of it.  Good example of what happens when blame/responsiblity is concentrated but power is not.

Re: Amazon v. California, Round II

Why, they can get back the money they lost before!

Re: Amazon v. California, Round II

So their politicians can burn it on more vanity projects.

 
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