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Amazon Says It Won’t Collect Sales Tax; State Says It’ll Send a Bill Then

| June 30, 2011
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Update 4 p.m. KQED’s Stephanie Martin this afternoon talked to Betty Yee, a State Board of Equalization member who represents 21 counties in central and northern California. The board is responsible for collecting sales tax.

Earlier today an Amazon VP said the company does not intend on collecting the sales tax that newly passed California legislation requires it to starting tomorrow. But Yee said the state expects Amazon and other online retailers to comply with the law. If they don’t, she said, the state will send them a bill for the tax at the end of the quarter.

Yee also said that the severing of ties with its California affiliates does not exempt Amazon from sales tax collection, as the law also establishes the tax obligation for businesses that own subsidiaries that may not be involved in the act of selling. Amazon has such businesses in California, including Lab126, which designed the Kindle, in Cupertino, and search technology firm A9 in Palo Alto. (This analysis by CNET’s Declan McCullagh, however, says a 1994 decision by a California Appeals court rejected similar arguments by the Board of Equalization in a case involving an out-of-state greeting-card company.)

Listen to the interview below:

Board of Equalization member Betty Yee on the state’s expectation that Amazon and other online retailers will collect sales tax starting tomorrow

Audio clip: Adobe Flash Player (version 9 or above) is required to play this audio clip. Download the latest version here. You also need to have JavaScript enabled in your browser.

Earlier post
KQED’s John Myers asked Paul Misener, Amazon VP of Global Public Policy, whether Amazon would begin collecting sales tax tomorrow, as the legislation signed into law by Jerry Brown yesterday requires it to do. Here was his response:

“This legislation is counterproductive and will not cause our retail business to collect sales tax for the state.”

Not sure what the company’s legal reasoning is. It’s been suggested that by ending its relationship with California “affiliates” — usually smaller web sites that provide links to Amazon and receive a commission from the company when someone makes a purchase — the company believes it will no longer have the kind of ties to the state that obligate it to pay the tax. The U.S. Supreme Court ruled in Quill Corp. v. North Dakota (1992) that a business has to have a “physical presence” in a state in order for it to be obligated to collect sales tax.

From the Tax Foundation Tax Policy Blog in 2005:

The Supreme Court sided with Quill, ruling that a taxpayer must have a physical presence in a state in order to require collection of sales or use tax for purchases made by in-state customers. Physical presence means offices, branches, warehouses, employees, etc. The existence of customers alone (i.e. economic presence) did not create sufficient nexus under the Commerce Clause for North Dakota to impose a sales tax collection burden on Quill Corp..

Overstock.com announced that it’s ending a similar affiliate program, stating that would be enough to exempt it from the new law. But Amazon also has some subsidiary businesses in California.

More on the online sales tax law.

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Category: Economy, Tech

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  • maxx

    So Amazon thinks it is above the law on paying taxes eh? Just pay your damn tax Amazon and quit being a corporate pig.

    Time for me to quit purchasing Xmas gifts from them then and cancel my Amazon credit card, too. My brother was going to give me a Kindle for my B-day, but I just told him to not bother. I will NOT support companies that tax evade, outsource and union bust. I am sick of their corporate $hit.

    • mike

      what a moron. Amazon wouldn’t be the one PAYING the tax you idiot. We would have to pay it. The stores just collect it. What a goon.

    • Scott

      OMG did you even read the article or comprehend anything in it?

    • Fred

      No, Amazon (rightly) believes that California cannot override the U.S. Constitution (the Commerce Clause, specifically), no matter how greedy the state may be.

  • maxx

    I KNOW that I would be the one paying the sales’ tax, Amazon would be collecting it. That is understood, I did not think that had to be pointed out since I assume those who read this are adults. When one lives in a sales’ tax state one pays sales tax.

    I also have a business and have done this myself, it is not hard you just have to file quarterly. It is actually a good deal, for businesses, you get to use the money for free. Unlike many I consider paying taxes a part of living in a civilization instead of a third world banana republic like Mexico. The more taxes I pay every year the better a year I had.

    Many wonder why the infrastructure in the U.S. started to go downhill starting about 30 years ago? The stupid Ronald Reagan/[re]publican automaton mantra of ‘taxes bad’. Tax avoidance, tax cheating and lowering of taxes on the rich and others who can afford to pay and should pay along w/corporatist wars are bleeding the country and not teachers, unions, Social Security, Medicare etc.

    Nice way to talk Mike, “moron”, “goon”. You kiss your mother with that mouth?

    • Mike Berger

      Maxx, you should be paying your “use tax” on all of the items you by from Amazon. There is a spot on the 540 tax return form for you to enter this information. If you have not been paying this tax, then you are the one who is evading taxes.
      The federal government has stated that companies are not responsible for collecting taxes in states in which they do not operate (have a nexus). California is trying to change definitions because they can’t stop spending…

      • Maxx

        Mike Berger. You are assuming that I live in a state with a sales’ tax. I do not. In future it might be a good idea before throwing around accusations of tax evasion to have them based in fact.

        When I go to sales’ tax states (e.g. across the river from me) I pay sales’ tax, that is only fair. Amazon should act responsibly and collect sales’ taxes when they sell (operate) to those in states that have one. I applaud California for trying to make them act responsibly, and if they do not, then bill them. Corporations do have the right to sell their stuff anywhere and anyway they like. Corporations are permitted to exist, they are NOT natural entities and despite the corporatist U.S. Supreme Court they are NOT persons. Making corporations follow the law is the American tradition.

        California like many other states needs income, because (mostly [re]publican) nut-bag politicos have cut corporate and higher income people’s taxes too much and simultaneously give out corporate welfare to the same corporations/individuals who do not need them.

    • mike

      my goodness, where to even start with someone that is so very misguided and bitter. Im suprised that it took you so long to blame everything on Reagan.
      No, the collecting of sales tax has nothing to do at all with quarterly filing, as someone who actually owns a retail store I can tell you that Sales tax is paid to the state within 30 days of the end of the month. So no, not really ‘free’ money.
      Furthermore what you liberal nut jobs never understand is first …that a business NEVER pays any tax. The tax is always passed on to the businesses customers and employees….. second… these decisions like those of Nutjob Hippie Gov. Brown do not take place in a vacum.
      Gov Brown made a stupid decision and now he has poo all over himself.. not only is CA not going to get the sales tax..but now 10K small businesses are effectivly put out of business in CA. so CA wont be getting the income tax either. I mean seriously, CA residents continuously pound themselves in the posterior by electing people like this…and Swartzy too. Its only going to get worse….and I dont know why people think that the gvt spending more money is the answer anyhow.

      • Maxx

        I am not misguided nor bitter. It depends upon what type of business that you have an how you pass on your taxes to the government entity. Businesses pay taxes, despite what you say. As a matter of fact if you are a successful business you pay taxes and if not you go out of business (and maybe STILL pay taxes).

        Just look at facts and history, Reagan (and his [re]publican wannabees/worshipers) started the downfall of the American middle class economy. He left office with more debt than all the presidents before him COMBINED. Likewise George Bush Sr., likewise George Bush Jr. (who pi$$ed away the surplus left to him). [Re]publican economics does not work, except for the crooks at the top. History shows this if one cares to look.

        Jerry Brown ran a very successful California when he was first Governor. Prop 13 (another stupid tax-cutting measure) started the problems we now see in California. Brown is at least trying to get out of control corporations to act responsibly and get tax revenues to the states. I hope he succeeds. Wild assertions of 10K lost small businesses notwithstanding.

        Government spending DOES work, that is why corporations (who get the most ‘welfare’ of any in the U.S.) are always looking to receive government spending. They just do not want to pay taxes. Government spending works better however when it goes to those at the bottom and not at the top.

        I do NOT want to live in a place where no taxes are paid nor collected, such places we see the results and they are not pretty. Look at Mexico or Sudan for examples.

        Oh yeah, damn right I am a liberal and proud of it (I am also a Vietnan era Army vet who was a hippie, too). I am a liberal like some other Americans, Jefferson, Franklin, Roosevelts etc. I would rather be associated with that crowd than the Bush family, Bachman, Palin, Reagan and most other [re]publicans from 1960 onwards.

  • mike

    Ok this is making more sense now. I will assume that you were shot in the head by the viet cong, suffered brain injury and this is why you cannot grasp simple concepts and talk nonsense I salute you for your service to our country…which by the way..did not start going ‘downhill’ as you say until the 60′s liberal radicals came along .. Coincidence ?
    I suspect you have struggled your whole life with mediocre results never realizing your true problem is the paradigm that you have built your life on is based upon idealism and wrong thinking. You cannot see the truth because to do so would invalidate everything that you have based your thinking on.
    The fact that you think Jefferson was a liberal is laughable and should serve as proof of your brain injury in any SSD claim you choose to pursue. Equally laughable is your negative view of an era that saw more wealth and prosperity created for more individuals than any in human history (sorry I guess you didnt participate).
    If you learn anything, learn this truth…I will try one more time for your learning disability, Businesses do not pay taxes… despite incurring the liability and writing the checks they DO NOT actually pay for them, they are always passed on to others in the form of higher prices, lower quality, less pay , less benefits etc. there is no ‘free’ money, it all comes from somewhere and its all connected, you tax a business 20% more…the business raises their prices and cuts back hours/wages
    One more time for your feeble mental abilities, decisions have consequences and do not occur in a vacuum, businesses and individuals will react to undesirable environments by avoiding or moving to places with more favorable circumstances its really that simple.

    • maxx

      You know what they about people who ‘assume’, and I very likely have a more successful life than do you as I have done quite well for myself.

      Firstly, your ‘facts’ are simply wrong, the American middle class earnings did not start going downhill consistently until Reagan in the 1980s, I saw this with my own eyes and U.S. government [real not absolute number] wage statistics back this up. Wealth at the top only does not mean a wealthy country, e.g. look at Mexico. Jefferson called himself a liberal in his own writings, as did his contemporaries in theirs and as does anyone who actually has read some history, that is not written by revisionists.

      Secondly your continued assertion that businesses pass on all their costs to those to whom they sell and pay no taxes exists only in a comic book world of neo-liberal economic theory not in real life for those of us who make their money in business. Of course one writes off expenses and charges as much possible, but one still pays taxes. You may be right in one thing though, there is no ‘free’ money. All value stems from LABOR, this according to Adam Smith as he wrote in the book “An Inquiry into the Nature and Causes of the Wealth of Nations”.

      Thirdly, when one has to resort to name calling it shows an intellectual laziness and lack of serious interest debating issues. You can try to project your own insecurities about having a mediocre life, learning disability etc. upon me, but I simply choose to ignore the personal insults and instead point out such nonsense for the laziness that it is.

      Lastly, I choose too to ignore the fascist ‘salute you for your service’ statement, such words are meaningless to me when they come from someone who argues that not paying taxes is somehow a good thing for a country. You know, taxes that would in fact ‘salute service’ with such things as a GI bill or VA hospitals to care for the inevitable wounded.