California to announce deal with Amazon

Amazon gets one more tax-free year, but by Sep 2012, fun time is over

After months of wrangling, it looks like Amazon and California legislators have finally settled on a deal.  Amazon will reportedly be granted a one-year reprieve from having to collect sales taxes on purchases made in California.  If, in that time, a federal bill for a single nationwide online sales tax regulation is passed, Amazon will abide by that law and California will drop its state bill.  But if a federal bill is not passed by September 2012, Amazon has agreed to start collecting sales tax.

Negotiations took place on Wednesday and a hand-shake deal was supposedly made late that night, but so far, the formal language of the deal hasn’t been revealed.  Many believe that California will make the announcement some time Friday, as today is the last day to pass any legislation for consideration in 2011, according to Forbes.  After today, California legislature recesses until January 4.

Governor Jerry Brown then has one month to sign or veto any bill that’s put in front of him.  So far, he’s been mum on whether or not he’s willing to sign such a bill.

Last week, Amazon proposed a deal in which it would agree to open six new distribution centers capable of hiring as many as 7,000 full-time workers in California if the state agrees to drop the Internet sales tax law.  California lawmakers were not amused.

Addressing the issue at Sacramento’s Radisson hotel last week, Governor Jerry Brown made it clear that he’s not thrilled with the idea of giving up tax revenue in exchange for jobs, according to the Sacramento Bee.

"Look, we need more revenues unless we're going keep curbing schools, courts, corrections,” he said.

If passed, the Amazon tax bill (AB 155) could bring in as much as $200 million a year in tax revenue by forcing online retailers to collect sales taxes on purchases made in the state of California.  But Amazon has said that if the bill is passed, it will have to cut ties with over 10,000 affiliates in California.  The California Retailers Association counters that Amazon has already cost California 18,000 jobs and $7.1 billion in lost economic activity in 2010 alone.

Amazon has stated that it is not against collecting sales tax, per se, but rather that it wants a single federal sales tax regulation—not 50 different state laws.

A federal law may come in the form of the Main Street Fairness Act, proposed by Illinois senator Dick Durbin.  A hearing for the bill hasn’t been set, but if passed, it would require all Internet retailers to collect sales taxes based on the customer’s location, not the retailer’s.

Amazon did not respond to inquiries from VatorNews as to its plans to lobby for a federal bill.

Image source: csmonitor.com