Amazon to give up the fight in California
Offers to pay up later if it doesn't have to fork out now
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. ®
Yes you are missing something
Amazon is not a California business or corporation. Amazon has no physical location in California.
Why should Amazon be subject to California's laws?
If I owned a shop in North Carolina and you walk in to buy something I am required to collect the sales tax. I as the business do NOT pay the sales tax, you do. The purchaser is paying it and they are the ones required to pay it, but the state requires that I act as their agent in collecting it from you. That's fine. I'm in their jurisdiction and beholden to their laws.
If you order it from California, I am not their agent, nor in their jurisdiction. Legally I am not subject to their laws, but you are. You still legally owe what they say you owe. If they passed a law saying anyone sending a letter owes us a dime, should I send a dime to the CA state every time I send a CA resident a letter? Hell, no.
This is just CA and the other states pulling these shenanigans trying to get illegal laws enforced because they know their residents won't be honest.
In fact let's flip the idea. What if NC passes a law saying I must collect sales tax from anyone making a purchase regardless of where they are. Would you be fine with paying NC a sales tax for an online purchase if you lived in France?
NC has no Amazon affiliates because of NC pulling this shit. I know two people who were making $10k+ a year as affiliates and paying income tax on that. Now NC has not sales tax and no income tax on any of those purchases? Bravo to the folks in Raleigh.
I'd guess that Amazon are betting that there will be a Federal solution (thus trumping the states solution) before they have to start paying tax. The longer you can delay paying a large penalty then the longer you have to collect interest on the cash that you put aside to pay the bill.
Sounds dumb? Ask Exxon how the Exxon Valdez payments are working out for them...
Moving The Target
There are already plenty of laws that require the consumer to pay taxes on items purchased online, but they can't be enforced. The States enacting these types of laws are just outsourcing their revenue collection points to retailers without having to pay for it. Sales taxes are silly anyway and ought to be done away with, but that'll never happen here because everyone prefers having their money eaten away 15 cents at a time.