Amazon, California Cut Deal on Online Sales Tax

It’s been a couple of weeks since I’ve annoyed readers with a post on the Amazon sales tax targeting web retailers, so, hey, here’s a new wrinkle: In California, Amazon.com has reached a deal with legislators to delay collections of the online sales tax for a year. In exchange, the online retailing behemoth will back off their effort to overturn the new law via referendum (an effort in which Amazon’s already spent some $5 million).

In the Los Angeles Times, a Golden State lawmaker describes the deal as a “safe harbor” that will give Congress a chance to act by passing a national law to contend with the thorny issue of tax collections on online sales by July 2012. Because Congress is very good at passing sweeping tax legislation in the middle of heated presidential elections, this will be easy matter to resolve. Hooray! Should Congress not act, Amazon agrees to start collecting the tax in Sept. 2012. (A caveat: California’s Democratic Gov. Jerry Brown hasn’t weighed in to say if he supports the deal yet.)

Any chance Arkansas would delay implementation of the online sales tax? Doubtful, though at least one legislator has called for its repeal.

Anyway, scores of online retailers have already cut off their affiliate contracts in Arkansas, meaning they’ll avoid collecting taxes on sales made in this state. So the state passed a sales tax law targeting online sellers, but all they have to do to avoid collecting the tax from their customers is end their contracts in the state, which they did. This is a good plan. Our elected officials are just very good at lawmaking.

BONUS: Arkansas’s own hometown kid that made good, Wal-Mart, is spearheading the drive to force online retailers to collect sales tax, tagging it as a fairness issue. But according to a separate report in last week’s LA Times, Wal-Mart argues they don’t need to collect sales taxes on sales made through their website by third-party affiliates:

The Walmart.com site, based in Brisbane near San Francisco International Airport, offers hundreds of products from a third-party retailer, CSN Stores in Boston, that are sold without collecting taxes when state residents buy them.

Wal-Mart insists that it’s not its responsibility to require companies that sell products through its site’s Marketplace Retailers program to collect California sales tax, even though the billing and the credit card transactions take place on Walmart.com.

But state Board of Equalization board member Betty Yee said she believes that Wal-Mart does have an obligation under the California law that took effect July 1 to collect the taxes.

The California Watchdog site calls it “total tax hypocrisy,” and it’s hard to disagree.

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