The Breakdown

Explaining Southern California's economy

Amazon is spending how much to fight a California sales tax?!?!

Over the weekend, the New York Times ran a story about Amazon's brisk spending on a 2012 referendum that would ask voters whether the state should be able to require the online retailer to collect sales tax. We're talking $5.25 million -- and as the NYT reports, we're more than nine months away from the actual vote.

The argument on the pro-tax side is that enforcing collection will bring in $200 million in revenue California "has already counted toward balancing the state budget." Obviously, down the road there's quite a bit more moolah at stake than that.

On the Amazon side, the argument has been framed in terms of jobs, but it's really about cash: Amazon figures it will do pretty well in California if it can sell people all manner of stuff for less than they can buy it from outfits that force them to pay the tax. Just for the record, the taxing part would occur at online checkout. Heretofore, it's been the responsibility of Amazon's California customers to pay the sales tax themselves -- and as you can imagine, that's a difficult responsibility for the state to enforce.

At the Los Angeles Times' Opinion L.A. blog, Paul Whitefield provides a pithy analysis of the Amazon position and why it's bunk. Here's a taste:

Let's get real. Amazon can talk all it wants about the Constitution and jobs and the like, but here's the bottom line, I think: Amazon doesn't want to collect sales taxes because it would hurt its business.

And the people who support Amazon?  They want a good deal, regardless of how they get it.

And everything else is just smoke and mirrors.

State Senator Loni Hancock would probably agree: the NYT has her pursuing a "quixotic quest to keep California voters from weighing in on whether online retailers should be required to collect sales tax. On Thursday, she pushed a new bill through a legislative committee that election law experts said could prevent Amazon from putting a referendum on tax collection before the voters."

At a level, Hancock -- and others who share her view, including the LA Times' editorial board -- are appalled by Amazon's intense desire to maintain its competitive advantage at taxpayer expense. Of course, she's probably concerned that if taxpayers get a chance to vote up or down on the tax, they'll say California's budget woes are the problem of California politicians. Pay a tax that we weren't paying before -- even though we were supposed to? You must be kidding!

There are some wheels-within-wheels on this sucker. For example, what Amazon insists is about jobs -- the company is supporting the referendum under a "More Jobs Not Taxes" rubric -- is actually about participants in an affiliate marketing program that has been discontinued in California. It's not really clear that these affiliates constitute a jobs engine -- although the case has been made that they generate meaningful revenue. At ZDNet, blogger Violet Blue presents her own Amazon affiliate experience as a way of explaining what the stakes are for others.

Don't forget that what's bad for Amazon is good for its "brick and mortar" competition. That includes Wal-Mart, an oft-mentioned foe. But it also includes small business that aren't Amazon affiliates, as Sen. Hancock indicated in a July press release. The little guys who lose out when a customer buys from Amazon to avoid the sales tax.

What I see here are a couple of conflicts. One exists between e-commerce advocates -- who appreciate Amazon cutting bloggers and other small online operators in on the action -- and Old Economy stalwarts, of a type, who want to preserve local businesses. Another is being played out on a more rough-and-tumble field between Amazon and its maxi-retailing rivals. The legitimate concern here is that the issue may be too complex for a referendum, where an economically beleaguered electorate may vote with their wallets. 

What we know for sure is that Amazon isn't backing down. And looks prepared to spend a lot of money to sustain its tax "exemption" in California.

Photo: KAREN BLEIER/Getty Images

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