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State plans future online tax revenue spending

July 26, 2011 12:00:00 AM PDT
There's a movement under way by Amazon.com to try and overturn a new online tax law, but the panel that oversees tax collections is already debating how the sales tax revenue should be spent.

The California State Board of Equalization says it needs a court order, a referendum or direction from the state attorney general to stop implementation of the "Amazon Tax."

Online retail giant Amazon.com began gathering signatures for a referendum, hoping to overturn California's new law requiring the Seattle-based company and other out-of-state "e-tailers" to start collect the sales tax from California customers.

Despite efforts under way to void that law the California State Board of Equalization, a taxing agency, began discussing how to implement the online sales tax.

Republican members question whether it's appropriate to proceed, knowing Amazon will likely get enough signatures to put the brakes on the new law until voters can weigh in next year.

"I have great difficulty, members, for us then to continue a regulatory process on basically a bill and a concept that indeed is on pause," said former state Senator George Runner (R-Antelope Valley), who sits on the Board of Equalization.

But Democrats pointed out Amazon is still in the process of overturning the online sales tax law, and gave the OK for the state to begin creating rules to comply.

"I believe we have a responsibility to basically uphold the law. It is the law. We took an oath of office to uphold the law," said Betty Yee (D), member of the Board of Equalization.

Many California-based websites that provided links to Amazon and other e-tailers lost a chunk of their revenue when their contracts were canceled earlier this month. Amazon and others did not want to start collecting the sales tax.

Former Amazon affiliates are disappointed California is moving ahead.

"If the signatures are gathered, then the rule-making becomes a moot point. It doesn't matter," said Rebecca Madigan, executive director, Performance Marketing Association.

Brick-and-mortar stores, though, are happy the state is moving forward to even the playing field, where businesses with storefronts and in cyberspace both have to collect the sales tax.

"I believe that the businesses that are set up online essentially to skate the sales-tax laws are frauding the government and the people," said Howard Skalet, owner of Skalet Family Jewelers.

Amazon executives told PC Magazine Tuesday the company prefers a federal law dictating the online sales tax, rather than leaving it up to the states.


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