Amazon Tax Suspended If Referendum Qualifies?

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Getty/Eric Tahyer

Legislative lawyers believe that if a referendum on the new law requiring sales tax collection by online retailers qualifies for the ballot, the law will have to be put on hold until the voters have their say.

If that opinion holds, it may raise the stakes for a budget written with an expectation of at least $200 million from the law in question.

"We are of the opinion that the operation of the statute would be suspended during that time period," writes attorneys for the office of the Legislative Counsel in a letter dated Friday to state Sen. Joel Anderson (R-San Diego).

Anderson apparently asked for a legal opinion on whether the law, contained in ABx 28, would be operable should the newly launched campaign to overturn it via referendum gather enough voter signatures.

The six page letter (PDF) tackles an issue raised a few times before, and several times since, voters approved Proposition 25 in November: whether a majority vote budget and its related "trailer" bills are subject to referendum.

Some have suggested that the budget and any related bill which includes an "appropriation" could, under Prop 25, may be immune from the referendum. In part, the quandary is linked to the California Constitution's exclusion of "urgency statutes" (which go into effect immediately and require a supermajority legislative vote) and those "providing for appropriations." Until Prop 25 lowered the budget vote in the Legislature, both seemed to apply to state's annual fiscal plan.

"Before Proposition 25," the opinion letter states, "the referendum was applicable only to statutes that did not go into effect immediately."

But now, write legislative attorneys, the budget can no longer be considered exempt from referendum because Prop 25 didn't explicitly say so. And while the constitution doesn't expressly put a statute on hold once a referendum has qualified for the ballot, Legislative Counsel says the courts have nonetheless operated on that assumption.

This debate has been largely theoretical up until now. But news that online giant Amazon submitted a referendum and that they appear to have the financial and political steam needed to gather 504,760 valid voter signatures by September 27 -- which would qualify it for the next statewide ballot -- makes it very real.

If the Legislature's legal beagles are right, the clearing of that hurdle would suspend the law until the day after voters keep it in place, or toss it out. The concluding thoughts of their new opinion letter state that:

"Thus, in the case of a statute, such as AB1X 28, that has gone into immediate effect pursuant to Proposition 25, the proponent of a referendum measure would have 90 days to circulate a petition for signatures and submit the petition for certification, just as with any other statute. During that 90-day period, the statute would remain in effect and be operative, as provided by its terms. However, if the referendum were certified...the statute immediately would be stayed and would remain stayed until an election is held for the referendum measure."

Note that the passage above does not allow Amazon and other online retailers to thumb their noses at the new state law in the interim, though they've clearly seemed to say that's what they'll do.

Meantime, the state Board of Equalization is scheduled to discuss implementation of the new law at a meeting here in Sacramento tomorrow morning.

One final, and fascinating, point: at the same time the Amazon tax referendum is on the streets for signatures, a bill awaits action by Governor Jerry Brown to cancel the February 2012 presidential primary, moving the race for the White House back to the Golden State's regularly scheduled primary in June. That would mean, if the Amazon tax referendum qualifies and this legal opinion is accurate, the law would be suspended for more than eight months until the June election... thus costing the state budget money on which it's counting.

Democrats, who argued the cancellation of the February primary would save the state money, may now not be so thrilled. Meantime, one of the opponents of nixing the February election, quoted during floor debate as saying so: Sen. Anderson, who requested the legal opinion and now may be happy his position didn't carry the day.

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About John Myers

John Myers is senior editor of KQED's new multimedia California Politics & Government Desk.  He has covered California politics for most of the past two decades -- serving previously as Sacramento bureau chief for KQED News and, most recently, as political editor for KXTV News10 (ABC) in Sacramento. He moderated the only gubernatorial debate of 2014, and was named one of the nation's top statehouse reporters by The Washington Post. Follow him on Twitter @johnmyers.
  • Randy Hall

    Let me see if I understand this. California voters are given the choice of shooting themselves in the foot by voting for more taxes or releasing themselves from tax bondage. Sounds like a no brainer.

  • Emily

    I don’t understand why people do not see the fact that we are in debt and that isn’t going to resolve itself. I am an unemployed grad student, which I receive no financial assistance, and was cut from my teaching position due to budget cuts. I do not qualify for unemployment since I am in school. It seems adding taxes could help CA get back on its feet and hire back the 25,000+ number of teachers it had to let go. Please note teachers are not the only victims in our fiscal crisis. If you don’t want to pay more taxes, don’t shop online.