Governor Brown signs Amazon compromise bill into law

Governor Jerry Brown

Governor Jerry Brown

Breaking news: California Governor Jerry Brown has signed into law Assembly Bill 155, a bill that represents a compromise between Amazon.com and California lawmakers.

We’ve blogged about Amazon’s objection to California’s affiliate nexus law, which required online retailers with affiliates in the state to collect sales tax. Since the law was enacted in July, Amazon had been collecting signatures to put a referendum on the law on California’s next ballot. But earlier this month California lawmakers and Amazon reached a compromise that takes that referendum off the ballot and puts the affiliate nexus law on hold until September 2012.

The idea behind the postponement is that it gives time for Congress to pass the Main Street Fairness Act—and for California lawmakers and Amazon to work together to help get it passed.

We’re thrilled that Governor Brown has signed the compromise bill into law. With the affiliate nexus law on hold, we expect Amazon and other online retailers to resume its relationships with California affiliates, which means that 25,000 affiliates will no longer face the choice of losing their income or moving out of state.

And of course, as our regular readers know, we’ve always supported the Main Street Fairness Act as a much better option than state-by-state affiliate nexus laws. It doesn’t hurt affiliates, unlike the state laws, and it actually makes collecting sales tax easier for online retailers—it authorizes only states that have simplified their sales tax laws to require online retailers to collect sales tax.

And then, the main objection that online retailers have to the Main Street Fairness Act—that collecting sales tax for multiple states is too difficult—simply isn’t true, not any more. Technology has reached the point that collecting sales tax is no more difficult for online retailers than calculating shipping rates, something every online retailer does. (More information on myths and facts about the Main Street Fairness Act is available here.)

We applaud Governor Brown for signing AB 155 into law. It’s practical, bipartisan legislation that is supported by both Republicans and Democrats in the California legislature and ultimately serves the interests of both online retailers and California residents.

7 Responses to Governor Brown signs Amazon compromise bill into law

  1. Ray says:

    “Thrilled” & “Applaud” may be premature.

    This is what Ray Pohlman, VP for government and community relations for AutoZone thinks about the prospects of Congress’ Main Street Fairness Act:

    “It ain’t going to happen on a national perspective. Your colleagues in Congress have no skin in this game. They’re not going to derive any revenue from this.”

    http://missouri-news.org/midwest-news/tennessee/democrats-jobs-tour-hears-concerns-on-regulations-job-training/9174

    Good Luck.

  2. Ray says:

    And guess who is not waiting for Congress to level the playing field?

    Finally Walmart has woken up to the wisdom of “If you can’t beat them, join them” instead of wasting lobbying dollars on the hopeless quest for a level playing field aka Main Street Fairness Act.

    Wal-Mart’s Quiet Tax Haven
    http://www.cnbc.com/id/44627207

    The sales tax haven can be found on “Wal-Mart Marketplace,” which has been up for a year on Wal-Mart.com.
    “‘It’s a mini-Amazon.com,” explains Brian Sozzi, retail analyst at Wall Street Strategies. “What’s interesting is when this site launched, Wal-Mart neglected to mention the no sales tax component on Marketplace transactions.”
    The best example of this practice is a customer’s Marketplace receipt where there is a bullet point that says “you’ll never pay sales tax.”
    Between CSNStores.com, ToolKing, Shoebuy, Pro Team and eBags, approximately 215,230 items are sold through Wal-Mart Marketplace.

    These mini-Amazon.com’s are gaining in popularity with major retailers. Best Buy recently announced its own marketsite .

    “We see it as a means to leveling the playing field with Amazon.com,” explained Dana Telsey, CEO and Chief Research Officer of Telsey Advisory Group.

    The tax-free items are sold on Wal-Mart’s website but not “by” Wal-Mart, since they are really sold by third-party retailers approved by Wal-Mart.

    • FedTax says:

      Thanks for pointing us to this article. It also caught our eye, and in fact we’re preparing a blog post on the subject. For now, we’ll just say that the reference to a “tax haven” and the enticing “you’ll never have to pay sales tax” are misleading at the very least — sales tax is still due on online purchases, whether or not the retailer collects it. It’s always been this way, and it’s true for the Walmart marketplace as well as Amazon. Walmart is still a strong supporter of federal legislation (as is Amazon, for that matter). But we have more to say about the new Walmart marketplace, so stay tuned!

  3. […] the internet is abuzz with news of Gov. Brown’s signing of AB 155 last week (the Amazon/California compromise), we’ve noticed a disturbing trend among articles responding to the news. Frequently there is […]

  4. Ray says:

    Today in SF Gate:
    http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/09/27/BUBT1L9K5I.DTL

    one such bill out there, carried by Sen. Dick Durbin, D-Ill., which in its current form would require California to sign on to the so-called Streamlined Sales and Use Tax Agreement, which seeks to simplify and make uniform sales-tax procedures. It currently covers 44 states.
    California has consistently rejected the agreement because state officials see it as limiting their authority.
    “It limits states’ tools to protect local economies and revenues,” said state Board of Equalization member Betty Yee, who pushed hard for California’s online tax law. “We cannot address all of our state’s diverse needs if we are required to ask the permission of Oklahoma, North Dakota and Vermont.”
    Others agree that the Durbin bill, as written, is a nonstarter for California. “We’re going to have to devise a solution that will appeal to states like California,” said Jason Brewer, a spokesman for the Retail Industry Leaders Association, a trade organization representing major U.S. retailers. “There’s great momentum for a federal law now, but whether we can do it in California’s time frame – that’s the million-dollar question.”

    • FedTax says:

      Thanks for the link! It’s discouraging to see such a response to SSUTA from state officials — especially since it’s factually incorrect. If California joined SSUTA, it wouldn’t lose any of its autonomy — and when Durbin’s bill becomes law, as a SSUTA member California would gain the authority to enforce its own existing sales tax laws with any retailer selling to California residents. We can’t imagine why Ms. Yee would say that the state would need to “ask the permission of Oklahoma” or any other state — that’s simply not the case. The closest thing we can think of is that states have to communicate any new “tools” — changes to sales tax policies — to other states, just as they must communicate them to retailers across the country if they want anyone to be able to comply. But that’s a far cry from “asking permission.”

      Here are the facts about SSUTA: It was created by businesses and states with the goal of simplifying multistate sales tax collection. When a state decides to join SSUTA — as twenty-four already have — it agrees to adopt SSUTA’s guidelines to standardize and simplify its sales tax laws. It also sends representatives to be part of the Streamlined Sales Tax Governing Board, to ensure that the needs and wishes of the state are met. If any changes are made to SSUTA after a state has joined, it has a say in what those changes are and whether or not they are implemented. And states still decide for themselves the rate at which items are taxed and whether or not they are taxable — nothing in SSUTA takes away that autonomy.

      As for Mr. Brewer’s comment, it sounds like he was merely saying it’s a question how soon federal legislation can be enacted, not that it’s a “non-starter” — looks like the reporter got a bit carried away, if the Brewer quote was the only one they had to back up that claim.

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