Monday, September 26, 2011
Grudge Match: Amazon versus the Bear Flag Republic
Photo Courtesy of Nils Liehberr on Flickr
In an attempt to collect sales taxes from Internet retailers, California introduced the “Amazon Tax” in June. California’s new law will require Internet retailers to collect sales tax if they use an affiliate program within the state to solicit business and their cumulative sales during the preceding twelve month period are greater than $500,000.
In a move consistent with its battle over sales taxes with New York, Amazon immediately cut ties with all of its California affiliates and began to promote a ballot referendum to block the law. In an open letter to their affiliates Amazon explained, “We oppose this bill because it is unconstitutional and counterproductive. It is supported by big-box retailers, most of which are based outside California, that seek to harm the affiliate advertising programs of their competitors. Similar legislation in other states has led to job and income losses, and little, if any, new tax revenue.”
Governor Jerry Brown rejected an offer from Amazon to delay sales tax collection until 2014 in exchange for new Amazon warehouses being located in California, perhaps in response to the wide speculation that without an avenue to avoid sales tax collection, Amazon is likely to build the warehouses simply to serve its California customers better. He did, however, accept an offer from Amazon to drop the ballot referendum initiative in exchange for a grace period. The new law takes effect immediately, but does not require retailers to collect taxes until Sept. 15, 2012.
Amazon has since banded together with independent storeowners and big-box retailers, including Target and Wal-Mart, to lobby Congress for a federal law regulating sales tax collection by Internet retailers. Per the Amazon-California agreement, any federal law will supersede the California law.
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