News Column

Amazon Offers Jobs To Avert Ballot Showdown Over Tax

Sept. 1, 2011

Dale Kasler and Torey Van Oot

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Amazon.com is offering to bring thousands of jobs to California as it tries to back away from a ballot-box confrontation over the state's new Internet sales tax law.

The online retailing giant, in a meeting late Tuesday of legislative staffers and retailing lobbyists, proposed opening six distribution centers that would employ a total of 7,000 Californians, according to sources with knowledge of the offer.

In return, Amazon wants a reprieve from the new law until sometime in 2014.

It's a strategy Amazon has used -- with some success -- in other states as it tries to squash a growing movement toward taxing online commerce. But it was uncertain whether Amazon's offer would gain much traction in California.

Democratic legislative leaders said they would continue to push an even stronger version of the online tax -- a version that Amazon would be unable to challenge at the ballot box.

And the brick-and-mortar retailers who have been pushing for the Internet tax said they're opposed to Amazon's idea.

Bill Dombrowski, head of the California Retailers Association, said he looked over Amazon's written offer and called it "totally unacceptable ... . We don't think it's a serious compromise, a serious proposal."

Brick-and-mortar retailers say they're losing jobs in droves because online retailers gain a huge price advantage by not collecting sales tax.

With Amazon's offer, "they might be adding seven (thousand jobs), but we're going to go out of business," said Dombrowski, whose group includes powerhouse retailers like Wal-Mart.

Amazon executives couldn't be reached for comment. The company has mounted an expensive campaign to overturn the California law, although it has said it supports a simplified, nationwide approach to online sales tax collection that's pending in Congress.

The California law, signed in late June by Gov. Jerry Brown, says online retailers such as Amazon must begin collecting sales tax immediately from California customers.

Asked about Amazon's new offer, Democratic legislators said Wednesday they're reluctant to forgo the $200 million a year in estimated new tax revenue.

"The state is owed $400 million over the next two years that we cannot afford to lose," said Senate President Pro Tem Darrell Steinberg, D-Sacramento.

He said his "first priority" is to pass AB 155 -- a strengthened version of the tax law that would carry an "urgency" clause and wouldn't be subject to Amazon's ballot-box challenge. That would require a two-thirds supermajority in both houses, and it's not clear if Democrats could get the Republican votes they need.

Amazon has refused to collect the tax and has spent $5 million on the voter referendum, which would be placed on next June's ballot.

The leading e-commerce seller, Amazon made its proposal after being invited by Senate Minority Leader Bob Dutton, R-Rancho Cucamonga, to meet with the brick-and-mortar retailers.

Dutton asked the retailers and Amazon "to get around the table and try and work out a deal that would be a win-win-win for the retailers, Amazon and the people of California," said Dutton spokeswoman Jann Taber.

George Runner, an Amazon ally who sits on the Board of Equalization, the agency that oversees sales tax collection, said he's encouraged about a possible compromise that could bring jobs to California.

"Whatever comes out of it has got to be about jobs," Runner said. "How can we help Amazon create a bigger presence in California?"

In South Carolina earlier this year, Amazon threatened to scuttle a big new distribution center until the Legislature agreed to a five-year moratorium on sales tax collection. Amazon must create at least 2,000 jobs by late 2013 for the deal to remain in effect.

A somewhat similar agreement in Tennessee has aroused considerable controversy. Amazon is building three distribution centers in that state, and the deal says Amazon won't have to collect taxes on goods shipped from those facilities.

In Texas, however, Gov. Rick Perry signed an online sales tax bill this year despite Amazon's threat to close an existing distribution center. The tax was part of a wide-ranging budget bill. Amazon followed through on its threat to close the distribution center, according to the Austin American-Statesman.

Call The Bee's Dale Kasler, (916) 321-1066.



Source: (c) 2011 The Sacramento Bee (Sacramento, Calif.)


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