Amazon.com and California legislators have reached a compromise on sales tax collection in the state. As part of the deal, Amazon will not have to collect sales tax until September 2012. In the meantime, the Seattle company said it would work towards federal legislation to institute a new federal sales tax collection system for online retailer.

Paul Misener, Amazon vice president, global public policy, said in a statement:

“This bipartisan, win-win legislation will allow Amazon to bring thousands of jobs and hundreds of millions of investment dollars to California, and welcome back to work tens of thousands of California-based advertising affiliates. This legislation also will allow us to continue to work with Congress and the states to obtain a federal resolution to the sales tax issue as soon as possible.”

The new legislation – passed 59-8 — now goes to Governor Jerry Brown for his signature.

Amazon was pushing towards a referendum in the state to wipe out the old legislation, which would have forced the Seattle online retailer to collect sales tax on purchases made in the state.  The company — which pulled the plug on affiliates in the state after Gov. Brown passed the initial bill — had committed more than $5 million towards the referendum.

California lawmakers said they were happy to avoid a referendum.

“It does save a very, very expensive and very divisive referendum campaign, pitting Amazon versus Wal-Mart, pitting brick and mortar versus online,” Assemblyman Chris Norby told the AP. “They’d be trashing each other.”

Amazon has taken plenty of knocks in recent weeks over its hard stance in California. In an editorial this week, The New York Times called Amazon’s position “an abdication of corporate responsibility.”

Comments

  • Peter H

    Who cares what NYT says.  Why should states be able to force out-of-state corporations into being their tax collectors?

    I run a small online retail store, and the burden of keeping of with the byzantine sales tax rules in all these jurisdictions is a real chore.  This food is taxed but that food isn’t.  This zip code has different rules than that.  These things represent real costs.

    The allusion to an unfair advantage over brick and mortar stores is also false.  Brick and mortar stores use local services like fire, police, etc.  Online retailers place no such burdens on the local jurisdictions.

    A state should not be able to force a foreign company to be that states tax collector and follow its crazy rules.

    • http://www.puzzazz.com Roy Leban

      The problem is the crazy rules, not the taxes themselves. Look at Washington — food is determined to be taxable based on ingredients (such as flour), not on what it is. A Milky Way bar is candy but a KitKat bar is not. (Admittedly, this is not a Washington rule, but a standard which Washington follows.) And, of course, different states have different crazy rules. Another example is different definitions on what is a product and what is a service. You may recall that Washington almost passed a law that would have defined software consulting services as a product.

      With respect to the stores using local services, remember that the tax is on the consumer, not the retailer. Consumers who buy things on Amazon use just as many local services as those who shop at Wal-Mart.

      If the state-to-state rules can be simplified to make it easier for online retailers to collect tax, I see no reason they shouldn’t.

    • http://www.puzzazz.com Roy Leban

      The problem is the crazy rules, not the taxes themselves. Look at Washington — food is determined to be taxable based on ingredients (such as flour), not on what it is. A Milky Way bar is candy but a KitKat bar is not. (Admittedly, this is not a Washington rule, but a standard which Washington follows.) And, of course, different states have different crazy rules. Another example is different definitions on what is a product and what is a service. You may recall that Washington almost passed a law that would have defined software consulting services as a product.

      With respect to the stores using local services, remember that the tax is on the consumer, not the retailer. Consumers who buy things on Amazon use just as many local services as those who shop at Wal-Mart.

      If the state-to-state rules can be simplified to make it easier for online retailers to collect tax, I see no reason they shouldn’t.

    • http://www.puzzazz.com Roy Leban

      The problem is the crazy rules, not the taxes themselves. Look at Washington — food is determined to be taxable based on ingredients (such as flour), not on what it is. A Milky Way bar is candy but a KitKat bar is not. (Admittedly, this is not a Washington rule, but a standard which Washington follows.) And, of course, different states have different crazy rules. Another example is different definitions on what is a product and what is a service. You may recall that Washington almost passed a law that would have defined software consulting services as a product.

      With respect to the stores using local services, remember that the tax is on the consumer, not the retailer. Consumers who buy things on Amazon use just as many local services as those who shop at Wal-Mart.

      If the state-to-state rules can be simplified to make it easier for online retailers to collect tax, I see no reason they shouldn’t.

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