Democrats, Retailers Say "No Sale" to Amazon Offer on Sales Tax

On Tuesday, at the behest of state Republicans, Amazon.com made offline retailers having trouble competing with the online sales giant as well as Democrats having trouble finding revenue to run the state an offer both, apparently, could refuse.

In exchange for delaying the recently passed law requiring web retailers to collect sales tax from their customers, a dictate that Amazon has not complied with, the company said it would open six California distribution centers, creating 7,000 jobs. It also said it would back off trying to pass a referendum to repeal the law.

No sale, Democratic leaders, Gov. Jerry Brown, and retailers are saying.

From the LA Times:

Brown on Thursday did not dismiss the Amazon bid out of hand. But, he stressed that he's mostly concerned about losing an estimated $300 million in badly needed state revenues that his budget expected to get once Amazon complies with a new law that took effect on July 1.

"I'm concerned about anything that would reduce revenues going forward because we're in a very uncertain economy," the governor said after attending an awards ceremony for correctional officers in Sacramento. "We need more revenues unless we're going to keep curbing schools, courts, corrections."

Here's Senate President Pro Tem Darryl Steinberg and Assembly Speaker John Perez basically rejecting the deal yesterday. Edited transcript follows the audio:

Audio: Steinberg and Perez exhibit skepticism on Amazon offer

Steinberg
The Amazon proposal is interesting but 155 (a bill that would nullify the Amazon referendum) is more interesting, because it upholds the law and guarantees the state will be able to collect the sales tax from Amazon over the next two fiscal years.

I don't think we can afford to say let's just set 400 million dollar aside. I appreciate Amazon wants to talk about creating jobs in California, that's a good thing, but let's focus on trying to get this 155 done.

Perez

Let me go a little further than that. I think people have phrased this discussion around Amazon in an odd way. They phrased it as if we're trying to pass a new tax on Internet purchases.

Not the case. what we're trying to do is make sure we collect the taxes that are already owed. The business practice that Amazon has been engaged in has basically inadvertently made anybody who has purchased on their system a tax cheat.

All of us -- I count myself among them, -- whether they purchase through a kindle device or on the Amazon web site, have an obligation to pay taxes on our purchases, and assume that as we're doing business on a web site with a legitimate business, that that is being taken care of. But Amazon hasn't done its part of collecting and then moving the taxes to the state as obligated.

So we've created thousands and thousands, maybe millions of Californians, who are cheating the system through no efforts of their own, no desire of their own to cheat. So by us actually moving forward with the legislation we passed, we're streamlining that for people, and not having them have to go through a rigorous process of recalculating every purchase they made so they can comply with the law. People purchase online for a variety of reasons, the biggest reason is convenience.

Maybe. But a July poll showed Californians about evenly split on the matter.

Yesterday, KQED's Paul Lancour interviewed Bill Dombrowski, President and CEO of the California Retailers Association. As you might imagine, Amazon's proposal was a non-starter with him:

"From our members' perspective that's a total phony offer," Dombrowski said. "We are not going to sit here and watch Amazon take market share for another three years from brick and mortar stores. No matter how many jobs Amazon pledges, it does not match the jobs we will lose in California if Amazon doesn't have to collect sales tax. They're just destroying brick and mortars."

Is there an offer they could make that would appease you and the retailers you represent, Lancour asked?

Dombrowski: "Start collecting sales tax."

Audio: California Retailer Association says offer is a non-starter

Last week, the San Francisco Business Times ran a good piece on the Amazon brouhaha, including a look at the company's California subsidiaries.

These may end up being the key to any legal ruling on the conflict. California's new sales tax law specifically classifies such subsidiaries as establishing a parent company's "nexus" -- or physical presence -- in the state.

That is necessary to overcome a 1992 Supreme Court decision ruling that states can only obligate out-of-state businesses to collect sales tax if the businesses have a physical in-state presence.

Got it?