Gov. Brown questions whether California can afford Amazon sales tax offer
Gov. Jerry Brown and the state's two top legislative leaders are showing little enthusiasm for Amazon.com Inc.'s offer to build at least two giant distribution centers and hire up to 7,000 workers if the state postpones until 2014 an attempt to force the Internet retailer to collect California sales tax.
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."
Amazon, so far, has refused to collect the tax on purchases made by California customers. Instead, it's contributed more than $5 million to a referendum campaign to repeal the new sales tax collection law.
Amazon would not comment on its new offer or the preliminary talks it held with legislative staff and representatives of California big-box retailers.
Supporters of the new law, led by the California Retailers Assn., argue that unfair competition from Amazon and other companies that do not collect sales tax has cost California about 18,000 jobs.
In a counterstrike, Democrats in the Legislature last week came up with a parliamentary maneuver that, if successful, would nullify the referendum. The trick would be passing a new law that would contain all the elements of the old one but could not be subjected to a referendum. To make that plan work, Democrats would need to win a bipartisan two-thirds vote of the members of both houses and persuade a handful of generally anti-tax Republicans to vote their way.
For now, top Democratic lawmakers said they are not interested in cutting a deal with Amazon and are pursuing the move to turn aside the referendum. They would do that by passing a bill, AB 155, in the last few days of the legislative session that recesses on Sept. 9.
"The Amazon proposal in my view is interesting, but 155 is more interesting because it upholds the law and guarantees that the state will be able to collect the sales tax from Amazon over the next two fiscal years," said Senate President Pro Tem Darrell Steinberg (D-Sacramento).
Not collecting the sales tax on purchases from Amazon turns California taxpayers into "tax cheats," said Assembly Speaker John Perez (D-Los Angeles).
The Democrats' reluctance to find a compromise with Amazon is not realistic, said George Runner, a conservative Republican and an elected member of the state Board of Equalization, the government agency that collects the sales tax. Since the Internet sales tax collection law took effect two months ago, neither Amazon nor any other out-of-state Internet seller has filed for an official permit to collect sales tax in California, Runner said.
"Clearly, there is no revenue" from the new law, he said. "To me, the compromise position has more potential revenue attached to it than the current law."
Runner isn't the only state tax official deeply involved in the continuing controversy over collection of sales tax from out-of-state Internet retailers.
Reacting to a story published earlier this week in The Times, Runner's fellow board member Betty Yee said she has been asking questions of Wal-Mart Stores Inc. about why some affiliated companies that sell their products on Walmart.com don't collect sales taxes on California purchases.
The Times reported that CSN Stores of Boston sells hundreds of sometimes high-priced products on California-based Walmart.com but does not collect the sales tax along with the sales price and sometimes shipping.
Wal-Mart said it leaves the decision on sales tax up to CSN and other so-called Marketplace partners.
Such collections, though, appear to be required under California's new law, Yee said.
Wal-Mart, which is a major player in the campaign to make Internet sellers collect sales tax just as big-box retailers do, has agreed to "assist the BOE in reaching out to these partners to assist them in understanding their obligations under California's e-fairness law," Yee said in a statement.
The law, she said, "is about leveling the playing field so that any business can compete on fair and equal terms."
-- Marc Lifsher and Anthony York
Photo: Amazon fulfillment Center in Phoenix. Credit: Bloomberg News