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Aug 26 2011

California Online Sales Tax Proponents Move to Invalidate Amazon.com Sponsored Online Sales Tax Referendum

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I wrote about this California legislative end around yesterday but now there is more.
A coalition of giant, brick-and-mortar retailers and their legislative allies have come up with a new strategy to try to head off Amazon.com’s referendum to overturn the state’s new Internet sales tax law.

On Thursday, lawmakers amended a bill in the Senate Appropriations Committee and sent it to the full Senate for a vote next week. If the bill gains approval from the Senate, the state Assembly and the governor, its passage would have the effect of nullifying Amazon’s current drive to qualify a referendum for the June 2012 budget.

The original law requiring Amazon and other large Internet retailers to collect sales taxes on purchases by California customers took effect on July 1. Within days Amazon announced that it was bankrolling a referendum campaign to collect 505,000 signatures of registered voters to put the question of repealing the law on the ballot. As of this week, Amazon said it was close to turning in the needed signatures.

But the campaign to repeal the law is now threatened by the latest legislative maneuver. Passage of a new law would supersede the old law, making the referendum invalid.

Supporters of the new law, including Wal-Mart Stores Inc., still  have a major challenge: The new bill is a so-called urgency measure and needs support from two-thirds of the membership of both houses of the Legislature.

According to the state Constitution, urgency bills are not subject to being repealed by a referendum.

This means that Wal-Mart, Target and Barnes and Noble who support the knife in Amazon.com’s back (they are business competitors understand) would have to achieve some GOP support in the California State Senate and California Assembly.

Will this be an easy task?

Well, you will have to convince these GOP legislators to support a tax increase (although online tax proponents claim it is just a tax collection issue). Going into an election year and with redistricting underway, this will not be an easy sale.

Consequently, the large retailers, which provide financial support for many Republican candidates in the Legislature, have to persuade at least three GOP members in the Senate and two in the Assembly to vote for the Internet sales tax collection.

That’s doable, said Bill Dombrowski, president of the California Retailers Assn. The latest bill, he noted, has raised a threshold for exempting small Internet sellers from collecting the California sales tax. The increase from annual sales of $500,000 to $1 million was sufficient to get EBay Inc. to remove its opposition, Dombrowski and state Sen. Loni Hancock (D-Berkeley) said.

But, there is also a “sweetner” in the news legislation – an exemption for e-Bay.

One key change in the proposal launched Thursday is an increase in the threshold of annual sales that online companies have to meet in order to be required to collect the tax. The new proposal increases that threshold from $500,000 to $1 million, and that change has prompted another online giant, eBay, to lend its formal support.

Assemblyman Charles Calderon, D-Whittier (Los Angeles County), who has led the effort against Amazon and is a co-author of the bill, called the eBay support “very, very significant.”

Bill Dombrowski, president and chief executive officer of the California Retailers Association, said the coalition to support online taxing has expanded in the past few weeks and expressed confidence in passing the new bill.

“We believe we’ll get the Republican votes, I’ll just leave it at that,” he said.

The Republican vice chairman of the Senate Budget and Fiscal Review Committee, Bob Huff of Diamond Bar (Los Angeles County), said he could be open to supporting the measure, especially given the change in the threshold for businesses.

“Definitely that’s a step in the right direction,” Huff said. “We need to do things to protect our brick-and-mortar stores.”

Republican lawmakers should understand that California voters are watching and do NOT support any MORE taxes. Period.

GOP Legislator – be Aware, be very AWARE. If you sell out California taxpayers, you will incur our wrath.

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