California lawmaker pushes for “Amazon tax”on Internet retailers

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Hoping to cash in on the billions of dollars of online transactions made by its residents, a California state assemblywoman, Nancy Skinner (D-Berkeley) proposed legislation on Wednesday that would impose a  sales tax of up to 10.75 percent, on customers of companies such as Amazon.com.

Skinner said that the new tax could bring more than $250 million to the state.

Even though a U.S. Supreme Court ruling bans the collection of sales sax on purchases made outside a state, legislators have been busy looking for ways to get around the law, or overturn it.

California is only one of several states that are considering legislation to tax sales from out-of-state retailers, which is currently illegal based on a 1992 U.S. Supreme Court ruling, Quill v. North Dakota.

Other states have passed similar legislation, only to see the matter end up in a costly legal fight. A number of recent court decisions have ruled that companies which do not have stores, warehouses or offices, are not required to collect the tax from customers.

Skinner is supported by a coalition of local and national merchants, all of whom have a physical presence in the state, such as Amazon rival Barnes & Noble. They say that despite the law, the current system is unfair. “This legislation will close the current loophole in tax law which has allowed out-of-state companies to avoid collecting California sales and use tax,” Skinner said.

California and other states argue that companies like Amazon.com or Overstock.com, have arrangements with marketers known as “affiliates”, individuals or companies that provide sales leads for the retailers. When the affiliates are located in-state, they say that’s the same as though the retailer is located there.

Amazon has roughly 25,000 affiliates located in California, according to Rebecca Madison, a spokesperson for the group. She says if the state attempts to use the affiliate relationship as the basis for charging the taxes, Amazon will terminate its agreements and stop paying the group.

“Out-of-state retailers will simply stop advertising on the California websites to avoid having to collect California sales tax,” she said. “So, at the end of the day, California website advertising income is cut off, and the state doesn’t collect sales tax revenue.”

Former Gov. Arnold Schwarzenegger vetoed similar legislation in the past, saying that it would cost the loss of thousands of affiliates jobs in the state.

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