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EcommerceBytes-NewsFlash, Number 2627 - September 09, 2011 - ISSN 1539-5065    4 of 6

Amazon, California Reportedly Strike Deal in Sales Tax Standoff

By Kenneth Corbin
EcommerceBytes.com
September 09, 2011




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The fight between Amazon.com and the state of California over a requirement to collect sales taxes appears to be coming to an end.

The ecommerce giant has reportedly agreed to abandon a referendum initiative to strike down the state's tax collection requirement and begin collecting sales taxes on purchases made by California residents beginning September 2012.

The law took effect July 1, but instead of beginning to collect the taxes, Amazon terminated its affiliate program in the state - a statutory trigger for the collection requirement - and launched a ballot referendum to overturn the measure.

Talks between Amazon and the California legislature had broken down earlier in the week after a group of Democrats said they planned to back legislation to kill the referendum effort, according to the San Jose Mercury News. But after it became clear that they would not be able to secure the two-thirds majority needed to spike the ballot initiative, talks evidently resumed, resulting in the agreement reached on Thursday.

Unnamed sources told the New York Times that the details are still being finalized, and the deal could yet fall apart.

The agreement would be negated if the U.S. Congress were to enact legislation concerning the obligations of online retailers to collect sales taxes. One such bill to harmonize and simplify the patchwork of state sales tax codes was introduced earlier this year with the blessing of Amazon, though industry counterweight eBay is sharply opposed to the measure.

On June 29, Amazon notified its affiliates that it was terminating their agreement to collect revenue for referrals to the site.

The rationale for the California law, similar to those either passed or pending in several other states, holds that in-state affiliates - website owners who collect a cut of the sales generated by referring links - are sufficient to establish a tax nexus in the state. State tax administrators supporting such a move argue that the affiliates constitute a "physical presence" within the state, subjecting online retailers to the collection requirement even if they don't have a distribution center, call center or other brick-and-mortar operation or permanent employees based there.

Shoppers are still on the hook for the tax even on Internet transactions where the retailer does not collect it at the time of purchase. They are required to remit it along with their state income tax return, though most consumers are either unaware of the obligation or ignore it, so the revenue goes largely uncollected.

Amazon did not immediately respond to a request seeking comment on the reported agreement.

About the Author
Kenneth Corbin is a freelance writer based in Washington, D.C. He has written on politics, technology and other subjects for more than four years, most recently as the Washington correspondent for InternetNews.com, covering Congress, the White House, the FCC and other regulatory affairs. He can be found on LinkedIn here .

About the author:

Kenneth Corbin is a freelance writer based in Washington, D.C. He has written on politics, technology and other subjects since 2007, most recently as the Washington correspondent for InternetNews.com, covering Congress, the White House, the FCC and other regulatory affairs. He can be found on LinkedIn here.

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