California Gov. Jerry Brown (D) has signed legislation requiring out-of-state online retailers to collect and remit sales taxes, even if the business has no physical presence within the state.
The world’s largest online retailer – Amazon.com — has responded by filing a petition to allow voters in the state to decide the matter. To place the referendum on the next statewide ballot, 504,760 must be collected from California residents.
The online tax law Brown signed in late June considers in-state advertising affiliates of an out-of-state online retailer as a physical presence of the retailer itself. The referendum seeks to overturn the law and allow in-state advertising affiliates to get back into business with their online retailers.
Amazon, Overstock, and other online retailers have begun severing ties with their California online affiliates. Some of those affiliate advertisers have already announced plans to move to neighboring states.
Board of Equalization Squabble
“As I warned, Californians are losing jobs and income as a result of the so-called ‘Amazon Tax.’ It should come as no surprise that impacted California business owners would seek its repeal,” said George Runner, a member of the California Board of Equalization.
Runner said his staff has identified more than 30 online sellers that have terminated their affiliate programs in California.
“Each termination represents lost jobs and lost income for California—losses that could have been easily avoided had the Governor and Legislature exercised a little common sense,” he said.
One of his counterparts on the Board of Equalization, Betty Yee, had a decidedly different take: “It is in every Californian’s best interest for online-only and store-front businesses to play by the same rules,” Yee said in a statement. “I strongly doubt Californians will support allowing one mega-company to get a special tax advantage at the expense of thousands upon thousands of small and large businesses that provide jobs and are invested in this state.”
‘Unfair Competitive Advantage’
The Alliance for Main Street Fairness argues Amazon and other online retailers that don’t collect sales taxes unless they have a physical presence in a state have an advantage over in-state retailers. The group was created to end what it calls the “online sales tax loophole.”
“Amazon’s actions clearly demonstrate their number one priority is to maintain their unfair competitive advantage at the expense of taxpayers and small businesses,” said Bill Dombrowski, president and chief executive officer of the California Retailers Association, in a statement issued through the AMSF. “Amazon’s continued disregard for the law has cost California tens of thousands of jobs and billions of dollars in lost economic activity. Their referendum demonstrates complete disregard for California employees and employers and would be a major job-killer in this state.”
The Performance Marketing Association, which represents online affiliates, says the California law is costing jobs and harming economic activity.
‘Could Translate Into Layoffs’
“We have said all along this tax will not garner any additional sales tax revenue for the state, but would instead result in an immediate 25 percent to 35 percent drop in affiliate marketers’ income, which could translate into the layoff of thousands of people statewide and businesses moving to other states, or perhaps even closing,” said Rebecca Madigan, executive director of the PMA.
“This referendum effort is a vehicle for affiliate marketers to continue to do business in California, which translates to real income for the state as these businesses pay their income tax, employment tax, plus other taxes. This translates to real income to the state, not the illusory gains falsely promised,” she said.
She also noted California lawmakers had promised citizens “they would be the determining factor in new taxes. They were denied that opportunity with this nexus tax, and we are pleased they will now have the opportunity to weigh in on this issue that is a matter of keeping 25,000 California-based businesses up and running.”