Calif. e-tailers to begin charging 'Amazon Tax' soon

August 18, 2012 12:16:19 AM PDT
Next month, a whole new world begins for e-tailers in California. Most will have to start charging customers a sales tax, a move that will not only swell the state's income, but could lead to a stampede in online buying.

We knew this day was coming, so enjoy the free ride while it lasts. The days of skirting the sales tax for most online purchases are numbered for Californians. The Department of Finance certified this week no federal internet tax law exists, opening the door for a new state law to take effect September 15 when out-of-state e-tailers like Amazon and Overstock must start collecting the sales tax, a big annual boost to California coffers.

"The estimates for the income that the state will receive from the collection of the sales tax is low-end, $250 million up to $500 million. So, that will be great in this time of deficits," Democratic Assm. Nancy Skinner of Berkeley, author of the Amazon Tax. Most Californians don't know that if an e-tailer doesn't collect the sales tax, they're supposed to pay it on their own when they file their income taxes.

Bookstore owner Alzada Knickerbocker fought for nearly a decade to level the playing field. She says brick-and-mortar stores have lost customers to internet competitors that often don't charge a sales tax. "People looking for lesser cost would naturally gravitate to that source. And, we always felt it was an unfair advantage," she said.

With an army of lobbyists, Amazon has been quashing state efforts to force e-tailers to collect sales tax on companies that don't have a physical presence in California. The deal the Seattle-based company made with California leaders was to seek a federal internet tax and if that failed, the state tax would go into effect. What the state got out of the delay was Amazon promising to open facilities in California and hire hundreds of people. The first warehouse in Patterson is already under construction.

Online shopper Gregory Clark is fine with paying the sales tax. "It's just crazy to have these large retail outlets escape taxation. Everyone is concerned about the survival of downtown and the survival of local commerce," he said.

Opponents, on the other hand, are upset they can no longer get away with a deal. "I think that's going to make me do a lot of shopping before September 15th," Earlyn Noel said laughingly. "Yeah, that's not good."

It's unclear whether the online sales tax will change behavior and drive people back to stores. The one advantage e-tailers still have is convenience.


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