Jerry Brown down on Amazon proposal

September 2, 2011

Gov. Jerry Brown said Thursday that he is leaning against Internet retailer’s proposal to put off enforcing a new law that taxes online purchases in exchange for the company launching several California distribution centers that would create several thousand new jobs. [SacramentoBee]

“I’m concerned about anything that will reduce revenue going forward because we have a very uncertain economy,” the governor said. “Look, we need more revenues unless we’re going to keep curbing schools, courts, corrections.”
The new online tax is slated to bring in about $200 million a year to the state budget.

In exchange for a two to – reprieve in paying the online tax, Amazon has offered to open six new distribution centers in California that would create an estimated 7,000 jobs.

Amazon has not yet complied with the new law that requires online retailers to immediately collect sales taxes from California customers.

From downtown San Luis Obispo to the parking lot of the new Target store on los osos valley road, paid signature gathers have been asking shoppers to sign Amazon’s petition.

Amazon has spent more than $5 million on an initiative drive to overturn the new law. In response, state lawmakers are promoting another bill that would make the tax measure impervious to a ballot-box challenge, the Sacramento Bee said.

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What has the government done to earn the the potential taxes from Amazon purchases? In the case of bricks-and-mortar stores, that’s an easy question to answer: The government provides necessary services to the business, like police and fire protection, roadway infrastructure, and whatnot. If you buy from Amazon, what has Amazon received in exchange for the taxes it collects? They already pay the costs of shipping, which includes the fuel, weight and registration taxes paid by shipper. What other government services do they consume?

With Amazon, it becomes a bit more interesting. After all, they have a few wholly owned subsidiaries, like Lab 126 which is behind the R&D for the Kindle and Zero Mass Engineering which is based right here in San Luis Obispo. However, these do not ship products to customers. They pay their costs by way of property taxes and the income taxes paid by their employees. I think it would be absurd to say that the presence of these operations somehow entitles California to sales tax on purchases that have nothing to them. I would say the same thing about Amazon’s affiliate program. The fact that 3rd parties from California can use Amazon’s infrastructure to sell products does not entitle California to sales taxes on all other purchases (although, it does entitle California to sales tax on purchases from these California sellers) .