Amazon Hopes to Overturn California’s Online Sales Tax Ruling

And the battle is supporting a ballot initiative that seeks to overturn California's recent ruling requiring online retailers to collect sales tax.

In June, California passed a new law requiring online retailers to collect sales tax from customers even if retailers do not have a brick and mortar store in the state. In response, Seattle-based retailer shut down its California affiliate program, calling the new law “unconstitutional” and “counterproductive.”

“At a time when businesses are leaving California, it is important to enact policies that attract and encourage business, not drive it away,” Paul Misener, Amazon’s vice president of public policy, is quoted as saying in The New York Times.

However, California officials, unimpressed with Amazon’s argument, claim the online retailer must still pay taxes this year, a sum estimated at $83 million. Naturally, the folks at Amazon disagree and are backing a ballot initiative that would repeal the controversial, and possibly unconstitutional, tax.

"We oppose this bill because it is unconstitutional and counterproductive,” Amazon wrote in a letter to California affiliates. “It is supported by big-box retailers, most of which are based outside California, that seek to harm the affiliate advertising programs of their competitors.”

Many disagree with California’s stance as federal law dictates that retailers do not have to pay sales tax in states where they do not have a physical presence. However, California, like four other states before it, has ruled that Amazon’s affiliates are enough of a physical presence to warrant a tax.

The New York Times reports that supporters of the proposed anti-sales tax initiative must gather around 505,000 signatures to qualify it for the ballot.

New York, Illinois, Rhode Island, and North Carolina have all passed laws requiring online retailers to collect sales tax, and Amazon has canceled its affiliate programs in all four states. Arizona, Hawaii, Louisiana, Massachusetts, Minnesota, Mississippi, Missouri, New Mexico, Tennessee, Texas, and Vermont are considering similar legislation.

Which side are you on?

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