Under intense lobbying from Walmart, California lawmakers have approved a measure forcing online retailers like Amazon to collect sales taxes made on purchases by California residents, even though federal law prohibits states from collecting sales taxes from companies that don’t have a physical presence in the state, which Amazon does not.
California, like other states that have passed similar laws, is trying to argue that the law is constitutional because Amazon has affiliates in the state. But these “affiliates” typically amount to to nothing more than somebody who runs a website that links to a product on Amazon and gets a commission. If the law is ultimately upheld in court, which is highly in doubt, Amazon would just sever its links to any such affiliates.
Lobbyists for brick and mortar retailers such as WalMart, Sears and Target argue that the current tax arrangement is unfair to them, because they have to collect sales taxes, whereas consumers could avert sales tax by purchasing online. But this is how federalism works. If California doesn’t want to create incentives for consumers to go elsewhere to purchase goods, then they shouldn’t have such high sales taxes in the first place.
Amazon isn’t totally in the right on this issue, though, since they’re pushing a federal tax law on internet commerce, the FT reports, “provided it was simple and applied even-handedly.” Though Ebay opposes any such law, as it would then apply to all the small sellers on its auction site.
Texas Gov. Rick Perry has been aggressively fighting attempts by his own legislature to push a similar law.
