LA Times: Jobs are key in the online sales tax argument

Los Angeles Times

Los Angeles Times: Amazon sales tax battle centers on jobs

A Los Angeles Times article examines the Amazon proposed referendum on California’s affiliate nexus legislation and what it calls the “escalating rivalry between Amazon and bricks-and-mortar retailers, which have seen an increasing portion of their sales go to the Internet.”

It has an efficient summary of each side’s argument; unsurprisingly in this economy, both focus on jobs:

Those conventional retailers say they are at a disadvantage because consumers perceive that they don’t have to pay sales taxes on Internet purchases, in effect giving buyers a discount of nearly 10%.

The stores also point out that they provide jobs — to salespeople, clerks, cashiers and more — and that California can ill afford to give a tax amnesty to Internet retailers that operate elsewhere.

“Amazon’s continued disregard of the law has cost this state over 18,000 lost jobs and a $4.1-billion loss in sales resulting in over $7 billion in lost economic activity in 2010 alone,” the California Retailers Assn. trade group said. “Their actions will continue to harm our schools, police, fire and the tens of thousands of small businesses who provide jobs and invest in our state every day.”

For its part, Amazon emphasized the jobs issue by saying that the new law has forced it to sever ties to 10,000 affiliates in California who are paid commissions to steer buyers to Amazon’s site by click-through links on their sites.

By cutting off California affiliates, the company hopes to avoid the key criterion — some presence in the state — that would make it subject to collecting sales taxes.

“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 tax,” said Rebecca Madigan, executive director of Performance Marketing Assn., a trade group for affiliates. Amazon would not comment, instead referring to her statement.

And what are the referendum’s chances attracting the 500,000+ signatures required to get on the ballot? Then, what are the chances of it passing? According to the article, both sides have a strong case:

When it comes to jobs, mega-retailers Wal-Mart Stores Inc., Target Corp. and scores of others can make a stronger argument than Amazon. But experts cautioned not to count out Amazon, as well as consumers’ own greed in wanting to shave taxes of 7.25% or more off their final prices — even though they legally owe that money.

There’s also a terrific exploration of how—and why—online sales are growing and sales tax revenue is shrinking.

We hope that the voters of California don’t get tricked into thinking the referendum would actually repeal the sales tax itself. Regardless of the outcome, the sales tax will still be owed by the consumers, just as it has been in California since 1935 (no, that is not a typo).

The article is definitely worth reading—go check it out for yourself.

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