- (Photo: Reuters)
Looking to work their way around collecting sales tax in California, Amazon filed a petition for a referendum with the California attorney general’s office.
The referendum would ask California voters in February 2012 to overturn a new state law requiring online companies or affiliates to collect sales tax, according to the Los Angeles Times.
Though Amazon is not required to collect sales tax in states where they do not have a physical presence, new laws in states like California require online retailers to collect sales tax if affiliates operating in the state lead customers to buy products online.
As a result, Amazon cut off all their affiliate programs in several states, including Colorado, Illinois, and recently California.
But California officials are stating that Amazon’s break with affiliate programs does not exclude them from their tax responsibility, which is approximated to be $83 million.
Because of online retailers like Amazon, California estimates that about $1.2 billion a year is lost in unpaid sales taxes. The new law could potentially bring in $317 million in state and local revenues, just in the first year alone, the Times reported. Subsequent years could rake in even higher earnings.
“We’re going to fight it,” Larry Levin told the Times. Levin is a spokesman for state Senator Loni Hancock, an author of the sales tax bill signed into law by Govenor Jerry Brown.
“If Amazon wants to take on California businesses, large and small, from Eureka to the Mexican border, we’re ready for them.”
Paul Misener, the vice president of global public policy at Amazon, on the other hand, believes that “Californians deserve a voice and a choice about jobs, investment and the state’s economic future.”
Amazon has called the new tax law “unconstitutional and counterproductive.”
Brick-and-mortar competitors like Target, Wal-Mart, and Home Depot don’t agree with Amazon, however, and have reiterated their stance about the competitive disadvantage in the sales tax discrepancy. Retailers find it unfair that customers can save about 10 percent when buying online.
Kathryn Gallagher, a spokeswoman for Home Depot, told the Times, “We believe Amazon should collect sales tax because it levels the playing ground for all retailers, small and large.”
The chairman of Sears Holdings Corporation also previously stated that either all retailers should be required to collect sales tax or none at all.
But Amazon, seeking a competitive advantage, is hoping that their referendum would exclude them sales tax payment.
The online giant retailer will need to collect 504,760 valid signatures to qualify for a referendum by the end of September 2011 in order to put the ballot into voters' hands in February 2012.
Once it reaches voters, Amazon seems confident that the referendum would be widely favored, especially because it works to benefit the consumer.