Amazon TaxInternet Sales Taxes

Amazon.com Files a Referendum to Ask Voters to Overturn California Internet Sales Taxes

After writing about this issue for months, I really did not see this coming.
Amazon.com Inc. wants California voters to decide whether to overturn a new law that forces online retailers to collect sales taxes there.

A petition for a referendum was filed Friday with the state Attorney General’s Office so that voters can decide on the requirement, which was included in a state budget signed into law in late June.

The new law forces online retailers to collect California sales taxes by expanding the definition of having a physical presence in the state. The requirement now kicks in if an online retailer has a related company, such as a marketing or product-development arm, or affiliates in the state – individuals and companies that earn commissions by referring visitors to Amazon from their websites.

Passage of the law, which is projected to help the state collect an additional $200 million annually, adds California to a growing list of states that have turned to such measures in hopes of bringing in more tax revenue. Its legislature passed a similar law in 2009, but then-Gov. Arnold Schwarzenegger vetoed it.

Billions of dollars are at stake as a growing number of states look for ways to generate more revenue without violating a 1992 U.S. Supreme Court ruling that prohibits them from forcing businesses to collect sales taxes unless the business has a physical presence, such as a store, in that state. When consumers order from out-of-state retailers, they’re supposed to pay the tax that is due, but they rarely do and it’s difficult to enforce.

States are trying to get around the Supreme Court restriction by passing laws that broaden the definition of a physical presence. Online retailers, meanwhile, are resisting being deputized as tax collectors.

Amazon had thousands of affiliates in California, which received fees varying from 4 percent to 15 percent of each sale they brought to the company. Amazon, which is based in Seattle, cut ties with them after the law’s passage.

Paul Misener, Amazon’s vice president of public policy, said the referendum supports “jobs and investment in California.”

“At a time when businesses are leaving California, it is important to enact policies that attract and encourage business, not drive it away,” he said.

I thought Amazon.com et. al. would be headed to court rather than the political arena which in California will certainly be expensive – more expensive to gather signatures for a referendum and then a television, plus direct mail campaign to overturn the law. But, it will certainly give the California GOP an issue to run on in 2012.

Maybe they will do both?

I will have the links to the exact language of the referendum and post some updates when they are available.