Amazon.com announced this week that it plans to bankroll a California ballot initiative that would make it easier for online shoppers to commit sales tax evasion.
At issue is a new California law expanding the group of retailers required to collect and remit sales taxes. Virtually every traditional “brick and mortar” retailer, as well as a number of online retailers, is already required to collect sales taxes on every sale they make. Absent this requirement, California’s sales tax law would be basically unenforceable.
But many online retailers are able to skirt this collection requirement because they lack a so-called “physical presence” in the state, like a warehouse or a store. (By contrast, Amazon.com does have a physical presence in the state even though they claim otherwise.) This unfortunate reality came about because of a misguided US Supreme Court ruling from nearly two decades ago, and the result of this arrangement has been completely predictable.
While Californians who shop at Amazon.com are required to pay sales taxes directly to the state, only a small number actually do so. But rather than attempt to track down these tax scofflaws one by one, California recently enacted a law that increases the number of retailers required to help the state enforce its existing sales tax laws. Specifically, online retailers that partner with California businesses to generate sales are now required to help collect sales taxes, just like most other retailers operating in the state.
Evidently, Amazon views its ability to offer an open highway for sales tax evasion as a huge advantage over its competitors. To protect that advantage, the company plans to spearhead an effort to collect half a million signatures in order to get a measure repealing the new law onto the ballot in either February or June of 2012. Presumably, the company is also planning to spend the big money needed to combat what the California Retailers Association has already promised will be a major opposition campaign. The fact that Amazon views sales tax evasion as so central to its business strategy that it’s willing to take these radical (and costly) steps is an enormous revelation.
Of course, as we’ve pointed out before, this is hardly the first time that Amazon has resorted to aggressive tactics to combat tax policy it dislikes. And California is learning the online giant will go to great lengths to avoid doing what most every retailer has to do every day – collect sales taxes.
Photo via Markuz Creative Commons Attribution License 2.0