Pleasanton Weekly

Opinion - March 11, 2011

Amazon.com: Pay sales taxes

Betty Yee of the state Board of Equalization is taking on amazon.com over its insistence that it's an out-of-state firm that ships directly to its California customers and doesn't need to pay sales taxes. And it hasn't. Yee's board estimates that the state's loss in unpaid sales taxes from amazon.com and Overstock.com, another large Internet retailer, is now at $200 million a year and growing. Buy a $1,500 flat screen TV from amazon.com and that's what you pay, with probably no charge on freight delivery to your home. Buy the same set at Best Buy, you lug it home yourself and also pay 9.75% in sales tax, the Alameda County rate. Adding roughly 10% to purchases at a local retailer gives Amazon and Overstock a competitive edge. That may be good for the buyer, but it's lousy for California and those of us who live here.

Efforts to force Amazon and Overstock to pay taxes on California sales have failed in Sacramento repeatedly. Last year, a provision that would force payment was attached to the 100-day-plus late budget bill. With some Republican legislators opposed because they saw it as a tax increase, the addendum was withdrawn so that a two-thirds majority vote could succeed. The year before, Gov. Arnold Schwarzenegger vetoed a similar measure, again on grounds that making amazon.com add sales taxes to its California orders amounted to a tax hike, which he opposed.

This time around, Betty Yee has a chance to force the sales tax payment. Because the Legislature only needs a simple majority to make budget changes that don't raise taxes and with Gov. Jerry Brown likely to approve the measure, she's working with state lawmakers to update California statutes governing tax collection from out-of-state online sellers. Her aim in changing the tax code, itself, is to promote uniformity and fair competition between Internet businesses and local "brick and mortar" retailers. This effort is essential to reform state taxes to keep up with changing technology and maintain essential government services, such as schools, public safety and environmental protection.

Shoppers in Pleasanton have to look no farther than Borders bookstore in the Wal-Mart/Kohl's shopping center to see the economic damage a 10% sales tax difference can make. Borders is bankrupt and closing 200 of its stores, including Pleasanton's. It has had other financial problems, to be sure, but its management cites amazon.com's unfair competitive advantage by not paying state sales taxes as a major cause of its demise. Judy Wheeler, who owns Towne Center Books on Main Street in downtown Pleasanton, sees potential customers shopping at her store regularly to jot down the title and author of books they like. Then they leave to order the book from amazon.com, saving $2 to $3 on average.

Amazon.com, meanwhile, has warned Yee that if she succeeds in forcing the company to pay California sales taxes, it will terminate business relationships with its online retailers here who earn commissions for marketing products the Seattle-based firm sells and ships. But Hut Landon, executive director of the Northern California Independent Booksellers Association, scoffs at the threat and so do we. California is amazon.com's biggest market and there's little chance it would stop doing business here over the sales tax issue. The sales tax, after all, is our money, not Amazon's. We may not like it, but paying sales taxes is the law. Towne Center Books, Wal-Mart, Best Buy and all the other retailers collect it, and so should Amazon. That would ensure fair competition for everyone, whether selling and buying online or at the local stores we want to stay in business.

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