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In June, California lawmakers passed a law that required Internet retailers to add state sales tax to orders shipping from California. Amazon (NASDAQ:AMZN) immediately began pushing for a ballot referendum to repeal the measure, in the meantime barring thousands of California affiliates from selling their products through the online store.
But the heated dispute could soon end with each side making concessions. Amazon has reportedly agreed to collect online sales taxes but only if implementation of the new law be delayed until 2014, at which point Amazon hopes that Congress will have passed a national law on Internet sales tax, a consolidated system influenced by Amazon (NASDAQ:AMZN) lobbyists. In July, Senator Dick Durbin (D-Ill.) first introduced legislation that would require online retailers to collect sales taxes in each of the 44 states that have them.
In return for California’s willingness to delay the tax, Amazon (NASDAQ:AMZN) has promised to create 7,000 jobs by opening new distribution centers in the state, also droppings its referendum to repeal the sales-tax law.
In 1992, the Supreme Court ruled that online retailers didn’t have to collect sales taxes in states where they had no physical presence, and since that time, online retailers have had an advantage over so-called “brick-and-mortar stores” because they can offer products at lower prices. California’s law chooses to extend the definition of “physical presence” to include related companies and third-party affiliates, and is now the first to do so.
Amazon (NASDAQ:AMZN) has cut affiliate programs in Arkansas, Connecticut, Illinois and various other states that have passed online sales-tax laws. Amazon does collect sales taxes in Washington state, where it is based, as well as North Dakota, Kansas, Kentucky, and New York, though it has been fighting the New York law. California has made deals with South Carolina and Tennessee similar to that now being reported with California, using distribution center jobs as leverage. When talks between Amazon and Texas Governor Rick Perry over an online sales-tax bill fell through, Amazon closed a distribution center there.
Amazon (NASDAQ:AMZN) does not wholly object to collecting sales taxes, saying it it would support “a simple, nationwide system of state and local sales tax collection, evenhandedly applied to all sellers, no matter their business model, location or level of remote sales.” And such may soon be the case, with national online sales-tax bills currently in both the U.S. House and Senate.
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