The company is said to be spending $3 million to collect signatures on a referendum petition that would ask voters in November to repeal an e-fairness bill that passed the state Legislature in June. The bill correctly, in our opinion, extends sales tax collection to many of the state's Internet retailers, including Amazon. The state estimates that the measure would collect some $200 million in additional sales-tax revenue annually.
A handful of other states, including New York, now require most mail-order companies to collect state sales tax. Amazon — which now sells thousands of general merchandise items in addition to books — apparently has decided that it will go all out to battle the California law, which would take away its unfair advantage over local stores and shops, including independent merchants Selzer and Bell.
In California, Amazon can claim up to a 10 percent advantage over so-called brick-and-mortar stores that must charge whatever sales tax is levied in the city and county where they operate. And although state law requires that residents who make mail-order purchases out of state voluntarily pay sales tax, the lion's share of this business is not reported to tax authorities.
At the press conference, Selzer, whose shop has been in business here for 81 years, emphasized that although online merchants may offer discounts, brick-and-mortar stores provide service and expertise. He added that local merchants sometimes see customers come in and try out new products, taking advantage of the store's knowledge, and then go home and make the purchase online.
Bell added that Amazon's claim that it now has no physical presence in the state is disingenuous, when its Kindle book readers are produced in San Jose and distributed in the Bay Area.
Many small merchants have been fighting Amazon and other big-box stores for years, charging that profits on local purchases leave the city or county and never return. Income earned by locally owned businesses circulates in the community three or four times over, benefiting local workers and companies, they say. Selzer said that all local merchants want is a level playing field, and are more than willing to compete with Amazon and other online retailers if they paid their proper share of sales tax.
Amazon, besides hiring professional signature-gatherers to drum up the support it needs to put the repeal referendum on the November ballot, immediately fired thousands of its California affiliate businesses who sold Amazon merchandise when the sales-tax measure passed in June.
In our view, Amazon's campaign is an incredible slap in the face to California taxpayers, who support local and state government by paying millions of dollars in sales taxes every year. One group, Stand with Main Street, that favors local brick-and-mortar businesses, estimates that such stores lose $4.1 billion in sales a year to online retailers who are skirting local sales taxes and not hiring local workers.
Another estimate, by Goldman Sachs, predicts that online shopping — which has more than tripled since 2000 — will jump from 4.4 percent of all retail sales now to 17.1 percent in the near future. Clearly, it was time for California to make sure this huge portion of the state's commerce pay its fair share of sales taxes, just like other businesses.
Many local governments, including Palo Alto's, have seen major drops in sales tax revenue during this and previous downturns. More and more of that is trickling away as a result of Internet purchases. It is interesting to note that the state will not license automobiles purchased out of state until the owner has paid the appropriate California sales and vehicle taxes.
There is no logical reason that some retailers should be exempt from collecting sales tax, while others are on the hook. No one is asking for special benefits for local businesses, but at least we should not have a tax policy that actually discourages patronizing local businesses. Let local businesses succeed or fail on their product pricing and service, not on the advantage of saving sales tax when purchases go to an online retailer.