In a controversial move, Amazon has announced plans to ask California voters to decide whether the state should require the online merchant to collect sales tax. The development comes about two weeks after the California legislature passed an Internet tax law similar to those passed in Illinois and several other states. (See related story on SmallBizChicago.com).
Amazon might be in for a battle though, as Californians are divided on the matter, the New York Times reported. While some consumers want to see Amazon continue selling “tax free,” others say bypassing the California legislature in favor of a referendum is a mistake, the story indicated.
In general, brick-and-mortar retailers have favored imposing an Internet use tax on Amazon and other online-only retailers, saying it would level the playing field for small shops that have lost sales to e-commerce merchants. But Amazon and others suggest state-imposed Internet taxes are unconstitutional, per the 1992 U.S. Supreme Court Case of Illinois-based office supply cataloger Quill Corp. vs. North Dakota. In that case, the high court decided that out-of-state merchants could be required to collect and remit sales tax for other states when they had a physical presence in those states, as defined as brick-and-mortar locations, offices, warehouses or employees, but not just customers. In 2009, former California Gov. Arnold Schwarzenegger vetoed an Internet tax law, but state legislators reintroduced a similar measure this year.
Some online merchants say they would support national tax rules on e-commerce, but suggest keeping up with myriad sales tax rates on the state and local level would be trying, particularly for smaller online merchants.
— Ann Meyer