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Amazon to give up the fight in California

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Amazon has cut a deal to lay down its arms in its battle with Californian legislators over the introduction of a sales tax for online retailers in the state.

The deal would postpone the imposition of a sales tax on Amazon until September 2012 and in return, the retailer would agree to stop spending its millions fighting the tax, the LA Times reported.

The online retail giant was supposed to start paying taxes in July, but refused to do so, and instead started a campaign that included severing its ties with affiliates in California and putting $5m into collecting signatures for a referendum challenging the new law.

This is not the first deal Amazon has tried to strike a deal with legislators, including California governor Jerry Brown. Last week, Amazon offered to set up two new distribution centres in the state in exchange for not paying up until 2014, but Brown rejected the deal.

At the time of publishing, Amazon had not responded to a request for comment.

Amazon and other online retailers argue that they don't have enough of a physical presence in states to warrant the collection of a sales tax and that trying to impose one on them is just the bricks-and-mortar shops' way of crippling them.

But other US states, including New York, North Carolina, Hawaii and Rhode Island as well as California, have started to push sales taxes on online retailers arguing they do have enough physical presence and that not taxing them gives them an unfair competitive advantage over big-box retailers.

The debate has also reached the US Congress, which is currently mulling over a National Internet Sales Tax Bill that was introduced at the start of August. Any decision Congress makes in the next year would over-rule state laws.

"It's a safe harbour for up to a year," said another of the legislators, assemblyman Charles Calderon. "If they can't get Congress to act by next July, then they will start to collect the tax in September 2012. If by chance they get Congress to act, then that would trump the state law."

The tax is a big deal for California, which is hoping to balance an $86bn budget signed in June that aims to bring in $200m annually. ®

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