Amazon.com is well-known for its vast array of consumer goods, available at the click of a mouse, and also for the fact that it does not charge sales tax. The latter has recently been the subject of discussion by lawmakers in California. Governor Brown signed into law a compromise which allows California to collect sales tax based on sales within California, thus providing funding to the cash strapped state. The deal will also simultaneously create thousands of new jobs, presumably by way of those responsible for administering the sales tax changes, and also in the form of employees to staff distribution centers across the state. Amazon still has the opportunity to circumvent the California sales tax if it can successfully broker a federal deal, outlining some revitalized sales tax system nationwide.
The Amazon.com Sales Tax "Deal"
The new law allows California to collect sales tax from online retailers beginning September 15, 2012. The delayed start date is part of a deal by which Amazon has agreed not to sever ties with California, nor pursue a voter initiative to overturn the state law.
Amazon had been able to avoid paying sales tax in California because of federal laws allowing for such evasion when online companies have neither a physical presence in the state, employees working within the state, nor consistent contact. In fact, federal case law prohibits states from requiring out-of-state retailers to collect sales taxes from customers without a sufficient "nexus" within the state. (Even though, however, the amount of business done by Amazon in California would most likely rise to the level of significant contacts for the purposes of reigning them into federal court for jurisdictional purposes according to the landmark case, International Shoe).
Traditional "brick and mortar" businesses have long bemoaned the unfair competition with the online retailer. Even such mainstream retailers as Target, Wal-Mart, and other corporate behemoths have bemoaned Amazon's unfair advantage in California, due to the fact that they have physical presence within the state, and thus do not receive the benefit of the federal tax loophole.
Click to learn more about Taxation laws.
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