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Amazon Reportedly Makes Deal With California Over Sales Tax

Deborah Wang
09/08/2011

Seattle–based Amazon.com has reportedly called a truce with the state of California in its battle over the state sales tax. Yesterday, California lawmakers announced a tentative deal with Amazon, the online retailer. The state would postpone implementing a new law that requires Internet retailers to collect sales taxes from state residents. In return, Amazon would halt a referendum campaign that is aimed at overturning the law. KUOW's Deborah Wang reports.

TRANSCRIPT

The law was passed earlier this year. It requires Internet retailers, like Amazon, to collect sales tax if they have affiliates or subsidiaries in the state of California. Right now, if you live in California and you buy something on Amazon, you essentially get it tax free. The company will not collect state sales tax.

Amazon argues that according to a Supreme Court ruling, companies only need to collect sales taxes in states where they have a so–called nexus, that is, a physical presence. Amazon collects sales tax in only five US states, including Washington, where the company is based.

But California lawmakers have followed the lead of a handful of states, including New York and North Carolina. They've passed laws stating that Amazon has "nexus" there, because of all of its affiliates and subsidiaries.

Amazon has responded aggressively. It's filed a lawsuit in New York, and it has severed its relationships with thousands of affiliates across the country. In California, the company has poured more than $5 million into a referendum campaign to overturn the new law.

California lawmakers now say they have a tentative deal with Amazon. They will postpone collecting sales taxes for one year. In return, they say, Amazon has agreed to drop its referendum campaign. The campaign is still gathering signatures.

An Amazon spokesperson did not provide comment for this story. But the company has said that it supports a Congressional effort to establish a national sales tax system instead, rather than one established by each state. I'm Deborah Wang, KUOW News.

© Copyright 2011, KUOW

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