The Un-united States of Amazon

Gabe Habash -- July 12th, 2011

The Street's map of Amazon's ongoing legal battles.

The Amazon/California spat is not going away.

On July 1st, we posted an article detailing the satisfaction on the part of California bookstore owners and Barnes & Noble in the wake of California’s decision to require online retailers to collect sales tax, just like retailers physically located in the state.

Now, Amazon is declaring it would support a referendum to end California’s new online tax law.

The problem? They need 505,000 signatures to qualify it for the ballot.

Amazon is facing an uphill battle. They cut ties with their California affiliates in an effort to skirt tax collection, but officials are saying this doesn’t get them off the hook and that they still owe an estimated $83 million in tax obligation.

Amazon has been protected against collecting taxes since 1992, when Quill Corporation v. North Dakota ruled that unless a retailer has physical stores in a state, they are not required to collect taxes.

But in recent years, more and more states are noticing the e-tailer’s deepening pockets. The Street has posted a great article breaking down Amazon’s battles, state-by-state.

A quick overview: 8 states’ affiliates have been cut off, with 9 more states at risk, and in 5 states Amazon is currently collecting taxes. Texas and Tennessee are the only two states working with Amazon, the latter because Amazon has expressed interest in building three new facilities in the state, and the former because Amazon has offered to create 5,000 jobs and invest $300 million in the state.

Paul Misener, Amazon’s vice president of public policy, summed up his company’s stance on California: “At a time when businesses are leaving California, it is important to enact policies that attract and encourage business, not drive it away.”

In response, Evan Westrup, a spokesman for Gov. Jerry Brown, said: “Amazon should be spending less time punishing its affiliates, threatening lawsuits and collecting signatures and more time doing what every other retailer does in California every day.”

But for all the back and forth–Amazon’s attempts at avoiding tax collection and all the stern resistance they are getting from lawmakers–and for all the difficulties it looks like Amazon will have to face, the public had a very definitive opinion, at least in one poll: The Street’s poll asking “Should Amazon be required to collect sales tax in every state in which it does business?” resulted in a 68% majority stating “No–I want my Amazon purchases to be as cheap as possible” as compared to 32% voting “Yes–it’s unfair to locally owned stores if Amazon is exempt from charging sales tax.”

Maybe those signatures won’t be as difficult to get as some think.

One thought on “The Un-united States of Amazon

  1. Theresa M. Moore

    The situation with Amazon reminds me very much of the situation with Prohibition. Customers want their alcohol and will do whatever it takes to get it. Unfortunately, states painted themselves into a corner by expecting the biggest sellers to give up their sales advantage. WalMart did it for years by undercutting everyone else in price, but since they are a B&M chain they have a physical nexus, so were required to pay sales taxes. They collected instead, which is a time honored ritual in practice nationwide. Shifting the responsibility for use tax onto customers is a deal killer, and so is requiring retailers to “collect” the tax. Nonsense. Retailers are required to PAY the tax but don’t want to pay it out of their profits. The situation could be rectified if retailers simply raised their prices to cover all overhead costs, including the tax liability, and then there would be no more need to even talk about it.

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