Amazon Pushes Referendum to Change California Sales Tax Law

Amazon.com is trying to get a referendum on the California ballot to get the recently enacted online sales tax law reversed.

The law took effect on July 1 as part of an effort by Governor Jerry Brown to close the state’s $15 billion budget deficit (see California Budget Deal Includes ‘Amazon Tax’). But so far Amazon has resisted efforts to collect the 7.25 percent sales tax from its California customers. After the law was enacted, Amazon quickly dropped approximately 25,000 California-based affiliate sites that provide links to its site and collect a share of the e-commerce sales, as it had threatened to do. Another e-tailer, Overstock.com, also dropped its affiliates in response to the new law.

Amazon has dropped affiliates in several other states with similar laws, including Colorado, Connecticut, Hawaii, Illinois, North Carolina and Rhode Island. In New York, it has filed suit to block a law mandating that it collect sales taxes, but currently collects sales taxes there, depositing the money in an escrow account until the lawsuit is resolved. The company has argued that the state laws violate the nexus principles established in a 1992 Supreme Court decision. However, the California law also requires that sales taxes be collected from companies that have a physical presence in the state as Amazon does. Amazon has Kindle software development facilities in California, as well as search engine subsidiaries A9 and Alexa.

In California, the Seattle-based e-tailer would need to collect valid signatures from at least 504,760 registered voters at least 31 days before the next election to qualify the ballot proposal, according to the Los Angeles Times.

Amazon defended its effort to bring the matter before voters. “This is a referendum on jobs and investment in California,” said Amazon vice president of global public policy Paul Misener in a statement. “We support this referendum against the recent sales tax legislation because, with unemployment at well over 11 percent, Californians deserve a voice and a choice about jobs, investment and the state’s economic future. At a time when businesses are leaving California, it is important to enact policies that attract and encourage business, not drive it away.  Amazon looks forward to working again with tens of thousands of small business affiliates in California that were harmed by the new law’s effect on hundreds of out-of-state retailers. As Governor Brown has made clear, it is important to directly involve the citizens of California in key issues and we believe that Californians will want to vote to protect small business and keep jobs in the state.”

A group claiming to represent the affiliate marketers who were dropped by Amazon voiced support for overturning the law.

“We are overjoyed to see a proactive campaign launched that could allow the 25,000 California Web-based businesses that PMA represents to get back to business by countering the recently signed nexus tax legislation,” said Rebecca Madigan, executive director of the Performance Marketing Association, in a statement.