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September 12, 2011

Amazon May Avoid Collecting Sales Tax in California for Yet Another Year Due to New Bill

By Ed Silverstein, TMCnet Contributor

Amazon may avoid collecting sales tax from its California customers for another year after a new bill was approved last week by the state legislature. However, the California bill still needs to be signed by Gov. Jerry Brown before it is enacted. If signed by Brown, with that extra time, Amazon may convince the federal government to come up with a national law on the state sales tax controversy.



Amazon was planning to take the issue to a statewide public referendum in June 2012. But with the new bill, the referendum will be dropped, according to media reports.

Earlier this year, California enacted a law which mandated that out-of-state online retailers collect sales taxes on purchases made by their California customers, TMCnet reported. Amazon resisted that law, which took effect on July 1, according to The Los Angeles Times. Amazon even dropped ties to its California affiliates to avoid having to collect the taxes.

But the more recent bill led Amazon to agree to work again with its California affiliates.

Amazon also points to the benefits of the more recent bill.

"This bipartisan, win-win legislation will allow Amazon to bring thousands of jobs and hundreds of millions of investment dollars to California, and welcome back to work tens of thousands of California-based advertising affiliates," Paul Misener, Amazon's vice president of global public policy, said in a statement quoted by The Associated Press.

Even so, The New York Times speculates Amazon could soon relocate small subsidiaries out of California and could then argue it would not have to collect the tax.

Across the United States, brick and mortar retail stores, along with state revenue officials, want to see the sales tax implemented to stop what they say is an unfair advantage to e-commerce retailers located out of state. The stores who complain about the advantage range from Target (News - Alert) and Wal-Mart, to smaller family-run retailers.

But Amazon argues that without a presence in the state it does not have to collect sales taxes from its California customers. State officials also claim they really need the revenue from the tax bill. California politicians expected to collect about $200 million in taxes from Amazon and other online retailers from the sales tax – if it had been in place during the current fiscal year.

In addition, between now and next September, the U.S. Senate may pass its own federal bill that would force online companies to collect sales tax, The New York Times reports.

Amazon dropped affiliates in Arkansas, Connecticut and Illinois after sales-tax collection requirements were enacted in those regions, The AP said.

Amazon currently collects sales taxes in North Dakota, Kansas, Kentucky and Washington. It also collects sales taxes in New York, as it fights a related New York State law in court.

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Ed Silverstein is a TMCnet contributor. To read more of his articles, please visit his columnist page.

Edited by Jamie Epstein
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