Friday, Governor Jerry Brown signed a compromise bill that delays when Amazon must start collecting those taxes.
Governor Brown's signature on the Amazon bill means the days of no online sales tax are numbered in California.
It's a compromise that Amazon signed off on. The Seattle-based company will stop trying to overturn the state's online tax law through a referendum.
In return, it will lobby Congress for a national online sales tax and open distribution centers in California that could lead to 10,000 jobs.
Brown says it's a win for the state budget and all retailers, online or not.
"First, they're going to bring thousands of jobs to California, hundreds of millions of dollars into the state coffers at a time we desperately need the money, and it's also leveling the playing field," said Brown.
"The sales tax issue must be resolved in Congress," said Paul Misener, Amazon.com vice president for global public policy. "It's the appropriate place and it's the only way that California will be able to obtain all the sales tax revenue that is available to be collected."
If Congress fails to act, Amazon and other "e-tailers" will have to start collecting the sales tax on September 15, 2012.
Some online shoppers had mixed feelings about it.
On the one hand, people can't afford it.
"Of course I mind paying the tax. That's my money," said online shopper Emily Coleman. "I'm wanting the product. I don't want to be paying taxes."
On the other hand, government needs to provide basic services.
"I personally don't mind it. I understand the value of taxes, so I'm OK with it," said Diane Mokoro, an online shopper.
The new law is especially a relief for brick-and-mortar stores, like Palo Alto Bicycles, which couldn't compete with e-tailers based on the sales tax difference.
Customers would come in, try the product and leave to buy the same thing online.
"What I can't counter is when the government gives one section of the economy a break and not me," said Jeff Selzer, manager of the shop. "It was just unfair."
Next year is an election year, so it will be extremely difficult to get congressional approval for any tax. So for California the online sales tax will likely take effect in a year.
Amazon said it is reinstating the thousands of affiliates it fired.