Amazon Strategy Relies on Tax-Averse Californians

Amazon.com Inc. (AMZN), the world’s largest online retailer, seeks to derail a new California law that requires the company to collect sales taxes by giving residents a chance to reject the levy through a ballot measure.
Voters don’t have an appetite for new taxes given the lack of trust in state government and will take a referendum “very seriously,” said Mark Baldassare, president of the Public Policy Institute of California in San Francisco. In November, Californians voted against repealing $1.3 billion in business tax breaks and passed a measure making it harder to raise fees.

“It certainly makes sense that the company would go to the voters on this, but the referendum is an unusual route,” said Baldassare, whose organization is nonpartisan. “The referendum, which is the ability to change the law that’s already been made, is not something that is very commonly done.”

Amazon filed a proposed referendum to repeal the sales-tax with the California attorney general’s office on July 8. The Legislature enacted the law last month, as part of the fiscal 2012 spending plan. The change is expected to generate an estimated $317 million from online retailers, including $83 million from Seattle-based Amazon, according to Anita Gore, a spokeswoman for the state agency that oversees taxes. The budget projects $200 million in revenue.

Amazon called the legislation “unconstitutional and counterproductive,” in a statement before the bill was signed. Amazon’s Stance
“We support this referendum against the recent sales tax legislation because, with unemployment at well over 11 percent, Californians deserve a voice and a choice about jobs, investment and the state’s economic future,” Paul Misener, vice president of global public policy, said yesterday in a statement. Amazon spokeswoman Mary Osako declined to comment today on the company’s strategy in filing the referendum, deferring to Misener’s statement. Supporters say the new law puts Amazon on equal footing with retailers that already collect taxes on online sales.

“If I purchase from Nordstrom online, I pay a sales tax,” Nancy Skinner, an Assembly Democrat from Berkeley who helped draft the law, said today in a telephone interview. “Why should Amazon operate under a different set of rules?”
Voters weren’t receptive to tax-increasing proposals on the ballot in November, said Jennie Bowser, a senior fellow at the National Conference of State Legislatures in Denver. Voters Reject Taxes
In Washington state, residents rejected a measure to impose an income tax on those earning more than $200,000 a year and restrained the state’s ability to raise other levies. The state doesn’t have levies on personal income. In Massachusetts, sales taxes on beer, wine and liquor were repealed. Amazon’s strategy has been tried before, Bowser said.
“This is far from the first time a corporation has funded an initiative effort to further their own commercial gain,” she said.
A proposition to delay the implementation of clean air standards in California was sponsored almost entirely by the energy industry, Bowser said. Costco Wholesale Corp. (COST) was behind a Washington initiative to end state-controlled liquor sales while letting high-volume retailers buy direct from producers instead of wholesalers, Bowser said.

Amazon would need to collect 504,760 valid signatures from California voters to qualify the measure for the ballot, or about 5 percent of the ballots cast for governor in the November election, according to the Secretary of State’s office. Time Limit
Supporters have 90 days to collect and turn in those signatures. Once validated, the measure would appear on the next statewide ballot, now scheduled for February 2012. A bill pending in the Legislature would move that vote to June 2012.

Losing $200 million if the referendum passes “is not insignificant,” considering lawmakers cut more than $1 billion from higher education, according to Senator Mark Leno, a San Francisco Democrat who leads the chamber’s budget panel.
The measure may spark a battle between corporate titans, pitting Amazon against Wal-Mart Stores Inc. (WMT) and Target Corp. (TGT), which operate stores in the state, Leno said today by telephone.
“There will be very deep-pocketed corporations opposing the measure -- Wal-Mart, Target, Barnes & Noble and a long list of corporations that are playing by the rules,” Leno said.