Amazon to Begin Gathering Signatures for Vote on California Tax

Amazon.com Inc. (AMZN), the world’s largest Internet retailer, will begin gathering signatures for a vote to repeal a new California law that requires it to collect sales taxes.

The Seattle-based company “will begin participating in the process of collecting the signatures needed to have this jobs referendum on next year’s ballot,” a spokeswoman, Mary Osako, said in a statement yesterday after state Attorney General Kamala D. Harris approved language for the petition.

Amazon.com has fought attempts by New York, Texas, Rhode Island and North Carolina to force it to collect sales taxes on purchases, saying the moves infringe on the federal government’s power to regulate commerce among states. The company cut ties with 10,000 California-based affiliates after Governor Jerry Brown signed a law imposing the tax on Internet retailers with a physical presence in the state.

“With state unemployment at well over 11 percent, we’re glad the people of California now have an opportunity to have their voices heard on this issue,” Osako said in the statement.

At stake is more than the $317 million a year that the California Assembly’s budget office estimates the state loses when residents fail to pay taxes on items they buy online. The showdown in Sacramento will help determine whether Internet retailers are treated the same as brick-and-mortar stores across the country, said Robert P. Strauss, a professor of economics and public policy at Carnegie Mellon University in Pittsburgh.

All Eyes

“Lots of people will be watching to see what happens in California,” Strauss, who has written about taxation of online retailers, said by telephone July 15. “Everybody knows Amazon is trying to redefine the retail trade by arbitraging on the tax issue.”

Steven A. Merksamer, a Sacramento-based lawyer for Amazon, said the Legislature defied a 1992 U.S. Supreme Court ruling when it approved the tax measure in June as part of a series of evening votes to balance the state’s budget.

The court ruling allows states to require retailers to collect sales taxes only if they have a physical presence, or nexus, in the state. Merksamer, in a July 14 phone interview, said Amazon falls short of that standard in California.

The California Retailers Association, a trade group of department stores, supermarkets, drug stores and specialty merchants, said voters would not be “bullied or fooled” by Amazon’s attempt to seek a “special tax advantage” in its largest market.

“Californians have a history of rejecting multibillion dollar companies that try and get special deals on the ballot for their own benefit and to the detriment of the state,” Bill Dombrowski, president of the association, said in a July 18 statement.

Amazon needs almost 505,000 signatures from California voters to qualify the measure for the ballot next year, according to the Secretary of State’s office.

To contact the reporter on this story: James Nash in Sacramento at jnash24@bloomberg.net.

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net.

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