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Friday, September 2, 2011

More on Amazon, ABX 28, Ballot referendum ... and even Congress, jobs and Senator Bumpers' 1994 proposal

There is more in the news regarding Amazon's opposition to the affiliate nexus law (ABX 28, Chapter 7). Amazon is reported to have offered to build a distribution center in California creating 7,000 jobs if the legislature will postpone the effectiveness of the affiliate nexus law for at least two years while Congress has time to enact legislation (presumably the Main Street Fairness Act - S. 1452). See Reuters article - "Amazon offers California jobs if it drops tax."

Some thoughts:
  1. Will Congress pass the Main Street Fairness Act? I think the first time it was introduced was by Senator Bumpers of Arkansas in 1994 as S. 1825 (103rd Congress). I don't know if was introduced in every session of Congress thereafter, but certainly in many. It was also S. 2153 (109th Congress) in 2005, called the Streamlined Sales Tax Simplification Act. There have been hearings over the years as well and modifications. Congress has a lot on its agenda, does it include this legislation?
  2. If Amazon really wants the federal legislation, perhaps it hopes California will push Congress to pass it. But, the current legislation would only allow states that have adopted the Streamlined Sales & Use Tax (SSUTA) to collect tax from remote sellers. So, why would California push for federal legislation that won't help it collect sales tax (other than from Amazon when it establishes a physical presence by building a distribution center in the state). Also, Prop 26 which requires a 2/3 vote for any bill that might cause someone to have higher taxes, likely requires that adoption of SSUTA needs a 2/3 vote (even adopting the rounding convention of SSUTA might cause a tax increase for some taxpayer, for example). With many Republican legislators having signed a pledge not to vote for any tax increase, they cannot vote for any tax bill that requires a 2/3 bill making it harder for California to adopt SSUTA and thus pointless for California to spend time trying to get Congress to enact S. 1452 (other than to get Amazon to build a distribution center in the state). (This is all really a wacky way to design a tax system!)
  3. If this gets Amazon to drop the ballot referendum, I think that is good. I expect that the ballot issue would be misinterpreted by those signing to get the measure on the ballot. I think many signers would think that there would be no sales tax on Internet purchases when it would just mean that Amazon would not have to collect the tax - the consumers still owe use tax.
  4. So far as books, Amazon announced in May 2011 that sales of Kindle books (digital) were greater than physical books. California and many states don't subject sales tax to digital books because their outdated sales tax only apply to tangible consumption. Of course, Amazon sells a lot of physical books and other items, so a distribution plant in the state would still provide sales tax collection obligations, but there would still be a lot of transactions (Kindle downloads, cloud computing transactions including the music in the cloud that California's out-dated sales tax doesn't apply to).
What do you think?


Anonymous said...

Stop the Main Street Fairness Act! Contact your U.S. Representative! We do not need to enforce taxes over the internet. This "Internet Sales Tax" is an economic recovery stopper!

Jeremy Pikes said...

I totally agree to your first comment that the Internet Sales Tax definitely is an economic recovery stopper...thanks for sharing.