The governor signed legislation today that makes California's spat with Amazon over collecting e-commerce sales-tax go away — for 12 months. That's not exactly how the governor's office spun it, however. It focused on the voter referendum that was avoided, and also on job creation:
“A prolonged, costly ballot battle is a benefit to no one,” Governor Brown said. “This landmark legislation not only levels the playing field between online retailers and California’s brick-and-mortar businesses, it will also create tens of thousands of jobs and inject hundreds of millions of dollars back into critical services like education and public safety in future years. It’s time for Washington to follow our lead and forge a bipartisan national solution.”
So what does this legislation mean, exactly? I'll break it down into bullet points:
- Amazon isn't off the hook for the sales-tax law that was signed in June, but it has been granted a year's reprieve. The idea is that the ultimate decision on this issue of how e-commerce sales tax should be collected can now be kicked up to Congress, to establish a national standard. Obviously, California is going to want to see Amazon compelled to collect sales tax, while Amazon will want Congress to demand that online sales tax be handled nationally as it is now in California: If you don't have a physical presence in the state, it's the responsibility of taxpayers to report transaction and pay the tax. One assumes that Amazon will spend mightily on lobbyist to secure the latter outcome.
- Amazon has engaged in a little tit-for-tat on this one, "pledging to create at least 10,000 full-time jobs and hire 25,000 seasonal employees in California by the end of 2015. This will generate an estimated half billion dollars of capital investment in California."
- Amazon has also agreed to abandon its referendum campaign, on which it had already spent a whopping $5.25 million.
- The affiliates that Amazon cut off in California after the sales-tax law was passed can now come back online. Affiliates, by the way, are just people who operate, say, a blog or website and post Amazon links on their pages. If visitors click through and purchase something from Amazon, the affiliates collect a percentage of the sale. Amazon cut these folks off out of fear that they represented a physical presence in the state.
Basically, this deal just shifts what would have been a state battle to the national level. Amazon can now spend its money in Washington to influence the decision.
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