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Amazon.com is using California’s initiative process to try to get a new law repealed. The law would require Amazon.com to collect sales tax in the state, based on labeling the use of Associates as “a physical presence.”
As part of its attempt to repeal the law, Amazon.com must gather over 500,000 signatures in order for a Proposition to be put on the ballot. In what must be seen as a truly ironic move, (and probably frustrating and annoying for brick-and-mortar stores that must collect sales tax), signature gatherers are using planting themselves in front of high-traffic retail areas. Naturally, quite a few of these retailers have lost sales to Amazon.com.
Bill Whalen, a research fellow at the Hoover Institution at Stanford University said, “It’s a particularly clever shot across the bows” of the big-box stores. “It says that not only do we intend to fight you in the court of public opinion but actually we’re going to come onto your front porch.”
Retailers nationwide have expressed frustration at the fact that Amazon.com pays no sales tax in most states. However, Amazon.com is actually relying on a Supreme Court decision made long before the giant Internet retailer existed as the reasoning behind its “no sales tax” stance.
In 1992, the Supreme Court ruled in the case of Quill vs. North Dakota that unless a retailer had a “physical presence” in a state, it could no be required to collect sales tax on purchases made in that state. That doesn’t mean that sales tax wasn’t required on the purchase; what it meant was that the purchasers of the item were supposed to pay the tax themselves as “use” tax on their state tax return.
Of course, in all honestly, most people either don’t bother, don’t know, or don’t keep track of what they spend. The original decision was about mail-order catalogs, but since Amazon.com doesn’t have a brick-and-mortar store in many states, it doesn’t collect sales tax in those states.
Using Affiliates, which reside in the state and put advertising for Amazon.com on their websites to define a physical presence has been used in a number of states, but in all but New York, where Amazon.com continues to pursue a legal battle, Amazon.com has simply dumped all its Affiliates.
With that, Amazon.com has taken to California’s Proposition process in an attempt to repeal the law. The online retailer has until Sept. 27 to gather nearly 505,000 signatures to get its Proposition on the ballot. A vote before California voters won’t take place until 2012, either in February or June.