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.