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California Senate approves Amazon sales tax deal [Updated]

September 9, 2011 |  8:28 pm

After days of intense negotiations between big-box national retailers and Amazon.com Inc., the California Legislature is poised to send the governor a bill that would require the Internet seller to start collecting sales taxes on purchases by Californians, beginning a year from now.

The compromise on Friday, the final day of the legislative session, was approved by the state Senate on a bipartisan 36-1 vote. As of 8 p.m., it had yet to clear the Assembly, but supporters said it had a good chance of passing.

[Updated at 10:17 p.m.: The bill passed the Assembly 59-8 and was sent to Gov. Jerry Brown for his approval.]

As part of the deal, Seattle-based Amazon agreed to start collecting California sales taxes Sept. 15, 2012, unless Congress first passes legislation setting a national standard. Such a law would end squabbling in dozens of U.S. states over whether and how to make Amazon and other online merchants follow the same rules as the big bricks-and-mortar chains.

The companies that operate on California Main Streets and shopping malls, such as Wal-Mart Stores Inc. and Target Corp., said they suffer from unfair competition because Amazon doesn’t collect sales taxes, enabling it to sell products at overall prices that are as much as 10% lower. Amazon countered that getting taxes from companies that don’t have stores or warehouses in the state is unconstitutional, according to a a 1992 U.S. Supreme Court decision.

Passage of the new bill, AB 155 by Assemblyman Charles Calderon (D-Whittier), and a signature from Gov. Jerry Brown, if it comes, would head off a costly and unpredictable legal and political fight between the rival business interests.

The governor, who signed an earlier version of the tax bill in June, has declined to telegraph his position on the current bill. Amazon, which until recently refused to collect sales taxes from its customers here, was getting ready to submit petitions with more than 500,000 signatures of registered voters. That’s sufficient to qualify a referendum for the June ballot seeking to repeal the law that took effect July 1.

The new bill, though, would supersede the current law and could not be subject to a referendum because it would take effect immediately upon being signed by the governor.

“Nobody wanted this referendum,” said Lenny Goldberg, a supporter who is executive director of the labor-oriented California Tax Reform Assn. “There’s a big down-side risk for everyone with the referendum. Amazon gets hammered [with bad publicity], and we could lose [the election].”

Amazon refused to comment on the legislative agreement it’s been negotiating for the last week. The deal between Amazon and the big-box stores is a “classic compromise” even though it deprives the state treasury of an estimated $200 million in sorely needed revenues during its first year, said Senate President Pro Tem Darrell Steinberg (D-Sacramento).

At the same time, the agreement guarantees that the state will get even greater revenues in future years without being bogged down in court battles. “Sometimes the [legislative] process works,” he said, “and this is a good example.”

-- Marc Lifsher

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