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Taxes: Can Amazon hire its way out of collecting sales taxes?

August 31, 2011 |  6:43 pm

AmazonState lawmakers and Amazon have been fighting on several fronts over the legislature's attempt to compel more online retailers to collect sales taxes on the items they sell to Californians. Amazon has refused to comply and is backing a referendum to repeal the law, prompting Democratic leaders to try to block the referendum with some, err, creative procedural maneuvers.

Now, according to the Sacramento Bee, Amazon is offering a truce of sorts: it will hold off on the referendum if the state doesn't try to force it to collect sales taxes for two years. To sweeten the deal, the Bee reported, the company has promised to employ 7,000 more people at a distribution facility in California.

Amazon has struck deals like this with other states, trading the promise to hire more workers in a state for détente in the war over sales taxes. But these negotiations come at the expense of the many retailers who are compelled to collect the tax, and as such are at a competitive advantage. That’s unseemly, and it smacks of a referee settling the rules for a game by talking to just one team.

The fundamental issue here isn’t whether shoppers should pay sales taxes –- they have to do so regardless of where they shop. But retailers with a clear connection to California, such as those with stores or headquarters here, are compelled to collect the tax, while those who don’t are not. Instead, shoppers are expected to pay the tax voluntarily when they file their annual returns.

Nevertheless, there’s a reason why lawmakers might want to strike such a deal:

Amazon has a pretty good shot at winning the referendum fight and spiking the tax law anyway. For the state, that could be worse than the status quo, which has Sacramento and Amazon merely arguing with each other over the current duties of online retailers. If Amazon wins at the ballot box –- after a campaign that would no doubt invoke the state’s long anti-tax tradition -– voters will have cemented in place an unequal sales tax system. Brick-and-mortar retailers, plus online retailers that acknowledge a nexus to California, would continue adding sales tax to the customer’s bill. Amazon and similar out-of-state retailers would continue to leave it off.

Meanwhile, the war goes on. The Health and Human Services Network of California on Wednesday launched a campaign to get shoppers to ask Amazon to drop its resistance to collecting sales taxes.

RELATED:

Amazon to California: Drop dead!

California's fight over direct democracy

Amazon debate: Is the Golden State just desperate for more gold?

-- Robert Greene and Jon Healey

Credit: Reuters / Rick Wilking

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