Lawmakers seek stronger Internet sales tax law

By Adam Weintraub

Associated Press

Published: Tuesday, Sept. 6 2011 4:55 p.m. MDT

Bill Dombrowksi, President and CEO of the California Retailers Assocciation, center, joined Assembly members Charles Calderon, D-Montebello, and Nancy Skinner, D-Berekely, in calling on lawmakers to reject a proposal by Amazon to grant the internet giant a two-year exemption from collecting sales tax, during a news conference in Sacramento, Calif., Tuesday, Sept. 6, 2011. Amazon has proposed that in exchange for the two-year reprieve from having to collect sales tax, it would build new facilities in California that could employ as many as 7,000 people.

Rich Pedroncelli, Associated Press

SACRAMENTO, Calif. — Supporters of a bill that would force some Internet retailers to begin collecting sales taxes immediately pressed lawmakers on Tuesday to pass the measure before the end of the session this week.

Gov. Jerry Brown signed a bill as part of this year's budget to expand tax collection by Internet retailers effective July 1, but Amazon.com has spent more than $5 million toward a 2012 ballot referendum to overturn it.

If approved, the bill under consideration this week could not be overturned by voters because it would be considered an urgency measure.

A first attempt to win approval of the bill in the California Senate Tuesday afternoon stalled 21-12 with no Republican support and a half-dozen senators not voting. The bill needs 27 votes for approval, and at least one more attempt to pass it was expected to take place Tuesday.

Democratic lawmakers and retail businesses that support the new bill, AB155, say Amazon is trying to undermine the legislation with a proposal to add 7,000 California jobs at new distribution centers if the online sales tax law is delayed for at least two years.

Speaker of the Assembly John Perez, a Los Angeles Democrat, said Amazon and other Internet retailers kill thousands of California-based jobs each year by unfairly undercutting local businesses on price because they don't charge the tax.

In the flurry of legislative activity in the last week of the session, Perez said, "California will not sacrifice real jobs for phantom promises."

Amazon has proposed adding a total of nearly 22,000 jobs in six states that have stepped up tax collection efforts, which would amount to roughly a two-thirds increase in its worldwide workforce of about 38,000, said Bill Dombrowski, president of the California Retailers Association. The

"The job numbers appear to be nothing but fiction," Dombrowski said.

However, Amazon has been pushing for a major expansion of its distribution network, adding at least 15 distribution centers as part of an effort to speed deliveries to customers.

Because of that planned expansion, Amazon might well have added distribution centers in the huge California market even without a delay on tax collection, said Hut Landon, executive director of the Northern California Independent Booksellers Association

Amazon did not immediately respond to a request for comment.

Amazon's lobbyists began circulating a proposal last week to carve out an exemption from the tax collection rules for retailers that invest $500 million in the state and add 7,000 full-time jobs with health benefits by the end of 2014. So far, the proposal has not been incorporated in any bill.

The struggle is playing out against a national backdrop, with at least eight states pushing to expand tax collection to Internet retailers this year alone and others tied up in lawsuits with Amazon and other companies. Texas Gov. Rick Perry in May vetoed a bill that would have expanded sales tax collection to more Internet retailers, but some lawmakers want to resurrect the approach, while Tennessee dropped efforts to push a similar bill this year in the face of promises that Amazon will add 1,400 distribution jobs in the state.

At the heart of the issue is a 1992 U.S. Supreme Court decision involving a mail-order retailer. The court decided that an out-of-state company must have a business "nexus" in a state — typically a retail store — to be subject to state tax collection. Internet retailers that have physical stores in California already collect the state sales tax.

The California law now on the books expanded the definition of that business nexus to include more out-of-state retailers, including those with marketing affiliates or sister companies in the state. Amazon has both, although it severed ties with marketing affiliates after the law was approved.

Backers said California now loses roughly $1 billion a year in tax that it is owed under existing tax law, but that is never collected by retailers or submitted by the customers who make the purchases. Amazon, the largest Internet retailer in the world, accounts for about $200 million a year all by itself, they said.

Opponents counter that California's patchwork of state and local tax rates makes it burdensome to collect taxes accurately; that higher costs will hurt customers during a weak economy; and that California businesses which benefit from affiliation with Amazon and other Internet retailers will lose sales.

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