California Wins as Amazon Deals

Friday, I wrote for The Daily Caller about the negative impact a tax deal between and the state of California would have the debate over taxing online transactions. Unfortunately, it looks as though that dubious deal was indeed approved by the State Assembly in the closing hours before the legislature adjourned. Below I discuss some of the history of the debate, but you can read the article in its entirety here.

All eyes are on the California statehouse today. On the table is a deal between online retail juggernaut Amazon and California lawmakers to postpone a major tax increase until fall 2012. Unfortunately, the compromise would mark a turning point in the online sales tax wars and pave the way for higher taxes nationwide.

California lawmakers and online retailers have been battling for years. In June, the state enacted a law requiring out-of-state online retailers to collect sales taxes on Californians’ purchases. To avoid the tax collection requirement, Amazon severed ties with its California-based affiliates. The retailer has even been working aggressively behind the scenes on a state ballot initiative to block implementation of the law.

If the compromise goes through, however, Amazon will reportedly drop its ballot initiative in exchange for lawmakers postponing implementation of the sales tax law for twelve months.

This would mark a major shift for Amazon, who has led the opposition among online retailers to tax laws such as California’s. Earlier this year, Amazon published an open letter condemning the law as “unconstitutional and counterproductive,” arguing that retailers with no physical presence in California should not be forced to collect taxes on the state’s behalf. Amazon also argued that the tax would distort the retail market and unfairly punish suppliers worldwide.