Amazon Wants Voters to Reject New Tax Law

Jul 12, 2011 - LegalZoom News Sources
Amazon seeks a referendum on a new law requiring online merchants charge sales tax.

Online retail giant Amazon is fighting a recently enacted California law requiring the company to collect sales tax.

According to the Los Angeles Times, Amazon filed paperwork for a referendum vote on the law that requires a 7.25 percent base sales tax on internet purchases. Prior to passage of the law, only conventional brick-and-mortar merchants had to collect California sales tax.

Shaun Bowler, a political scientist at the University of California-Riverside, told the L.A. Times the vote could be close because consumers do not like taxes, yet conventional retailers do not want Amazon to have the competitive advantage that comes with not having to charge tax.

In an effort to remain exempt from the law, which applies to internet merchants affiliated with businesses located in the state, Amazon has cut ties with about 10,000 California-based small businesses that earned commissions by referring consumers to Amazon to make purchases. Despite this, accountant Bruce Gray told the San Bernardino Sun the law could benefit California small businesses by making it easier to compete with prices offered by internet retailers based in other states.

The Orange County Register identified LL Bean, Overstock.com, Redcats, Vistaprint and Drugstore.com as other online retailers that will be significantly impacted by the new law.