As expected, Jerry Brown signed AB 155, the compromise hammered out between California legislators, big off-line retailers like Wal-Mart and Target, and concerning a law enacted in June requiring online retailers to collect sales tax from customers. Previously, they had been exempt from that obligation because of a Supreme Court ruling, which prevented states from requiring retailers to collect the tax unless the retailers had a physical presence in the state.

The new law widened the definition of what such a physical presence would look like, extending it to “affiliate” sites that refer customers to big online businesses like Amazon, and to company subsidiaries, of which Amazon has several in California.

But Amazon has never complied with the law, which was supposed to bring in $200 million annually and help balance the budget. Instead, it sought a referendum to have the legislation repealed. Lawmakers then parried by trying to pass a law to nullify that referendum. That seemed to bring Amazon to the table, and it proposed to back off its referendum, while also opening six California distribution centers, creating 7,000 jobs. But Democrats said “no sale”. As did brick-and-mortar retailers who have complained for years about an unfair competitive advantage accruing to Amazon, which offers its merchandise without having to charge the extra tax.

Under the new law, Amazon does not have to collect sales taxes until September, 2012. But if Congress, before then, enacts a federal law prescribing how online retailers should be taxed, that would supersede California law. (Let the lobbying begin.)

Bottom line for consumers: You have at least a year’s grace period from any sales tax added to your online purchases.


Governor Signs Amazon Compromise Bill; No Online Sales Tax For at Least a Year 23 September,2011Jon Brooks

  • zadoc

    As a consumer I like not paying sales taxes online. But as a business owner, that’s really unfair to local business.

    POLL: Is it fair to local businesses that sales taxes don’t apply to goods purchased from online retailers?

  • REP

    BULLSHYT….i don’t want to pay taxes as a consumer. The law clearly say that you don’t pay taxes unless you have a physical presence in the state. Amazon had no physical presence in California. California is not going to win this…either way.

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