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Amazon cleared for anti-tax petition drive

July 19, 2011 12:00:00 AM PDT
Amazon gets the green light for a petition drive aiming to overturn California's new online sales tax. Now the battle lines are drawn as big retailers in the state get ready to fight Amazon.

Amazon has been busy in court these days, challenging Internet sales tax laws in Illinois, New York and other states. But in California, Amazon got approval to use the ballot box for a voter referendum against California's Internet sales tax.

On the one hand, Amazon.com, a $96-billion Seattle company, doesn't think it should have to collect sales tax from California customers under the new law because it has no stores.

The other side is led by Wal-Mart, a $186-billion chain that does collect sales tax, even from online customers, because it has physical storefronts in California.

The California Retailers Association includes Wal-Mart, Target and the Gap. They will have to put together a sizeable multi-million-dollar war chest to fight Amazon's effort to overturn the online sales tax.

Without tax fairness, the group says, more stores will follow Borders Inc.'s path and close for good.

"What we're seeing is customers using our retail stores as showrooms ... coming in, looking at the merchandise, looking at the stereos, looking at the TVs, and then going out and buying it online because they don't have to pay the sales tax," said Bill Dombrowski, president and CEO, California Retailers Association.

If Amazon can get more than 504,000 valid signatures by September 27, the online sales tax law will be put on hold until California voters can weigh in next year on whether "e-tailers" should collect the sales tax. Its strategy is to frame the tax as a job-killer.

In a statement, Amazon spokeswoman Mary Osako said: "With state unemployment at well over 11 percent, we're glad the people of California now have an opportunity to have their voices heard on this issue."

Savings.com CEO Loren Bendele hopes voters agree the Amazon tax law is hurting the economy. The Santa Monica-based website was one of 25,000 California affiliates that once provided links to Amazon and other e-tailers, before those e-tailers fired them to avoid having to collect the sales tax.

"It doesn't make Amazon start collecting sales tax. All it does is make them stop working with California businesses and make it uncompetitive for us to operate in California," said Loren Bendele, a former Amazon.com affiliate.

The brick-and-mortar stores' challenge is to get Californians to understand that this is not a new tax. There's been a line on the state income tax form for years, a "use tax," a sales tax that you didn't use for online purchases. Hardly anyone, though, fills it out.


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