Wal-Mart vs Amazon in California tax law battle: Booksellers in the crossfire

Wal-Mart vs Amazon in California tax law battle: Booksellers in the crossfire

Summary: California's internet tax battle reveals a clash of retail titans Amazon.com and Wal-Mart, making pawns out of American booksellers and consumers.

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TOPICS: Amazon, Hardware
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California's state tax battle reveals a nationwide clash between retail titans Amazon.com and Wal-Mart, while American booksellers and consumers are used as pawns.

At the end of June, Amazon.com dropped thousands of California affiliates when the state passed a sales tax law that the online retailer believes is unconstitutional. And Amazon wants to take this fight to the ballot box.

Amazon has submitted referendum papers to undo the new law in the next statewide election - while Wal-Mart and pals ramped up its national anti-Amazon "Main Street Fairness" PR campaign.

That's right: Wal-Mart (along with Target, Overstock.com, Target, Best Buy, Home Depot and Barnes & Noble) are behind the propaganda-heavy "Alliance for Main Street Fairness" PR campaign. They're the ones pushing states to make the new tax laws, while making no bones about the fact that they're after Amazon.com on a nationwide scale.

I'm guessing you're with me in thinking that Wal-Mart isn't exactly what anyone would call synonymous with "main street fairness." And yes: they were quick to blame Amazon for Borders' shutdown.

See also: RIP: Borders Books

However, I'll be the first to agree that Amazon dumping over 10,000 online affiliates (small businesses in their own right) didn't exactly do them any favors in the goodwill department.

California lawmakers aren't coming out of this smelling like roses either.

Californians already pay sales tax on their online purchases due to recent enforcement of the "use tax" laws, where residents are required to declare what they owe in out of state online purchases on their tax returns. Passing the new tax law on top of the use tax law feels to me like double-dipping and dirty pool - and it's called double taxation.

Amazon hasn't exactly turned their backs on the issue. After the Board of Equalization declared that Amazon still had nexus in the California, on July 7 the online retailer formally filed a request with the California Attorney General's office for a voter referendum to overturn AB 28X.

Wal-Mart's sock puppet "The Alliance for Main Street Fairness" has an excellent PR department, with which they've spun the tax law rhetoric into "sales tax fairness" and trotted out appliance salesmen to plead the case of the little guy.

Many were quick to point out that few people buy refrigerators online.

Prior to the dramatic signing of the nexus law in California, "Main Street Fairness" had cozied up to the American Booksellers Association, Northern California Independent Booksellers Association, and Southern California Independent Booksellers Association. This enabled "Main Street's" message to tap into booksellers' grass-roots reach.

It also tapped into the fear, uncertainty and frustration felt by booksellers faced with a turbulent market whose uncertain future is being shaped by consumer demand for e-books and other hallmarks of the e-commerce era.

Amazon has been fighting state law tax battles in many states - in some instances dropping affiliates, in others, coming to agreements with states. Amazon states they want a tax structure that is applied evenly across all states.

Amazon cites the Supreme Court's 1992 ruling that expanding nexus in this way puts undue burden on, and in fact, hinders interstate commerce. In it, the Court overturned North Dakota's expanded nexus, saying that Congress should resolve the matter. They determined that there should be a safe harbor for vendors "whose only connection with customers in the taxing State is by common carrier or the United States mail."

Nonetheless, Amazon has launched an effort to overturn the law and submitted referendum papers to the State Attorney General's office. If approved, Amazon will begin collecting the 504,000 signatures needed to qualify the measure for the next statewide election in 2012, currently set for February.

The American Booksellers Association responded by reaffirming their ties with Wal-Mart's "Main Street Fairness" while claiming in an email statement to booksellers that Amazon was merely trying to maintain its "unfair sales tax advantage over Main Street retailers."

The ABA also said the associations would be reaching out to California booksellers to do outreach in support of Main Street's agenda and engage their customers to do Main Street's lobbying.

I'm an author, small publisher and a book lover - I was also a California Amazon affiliate, so as an individual and an indie small business owner I have a lot of interest here. The ABA is an organization with the best intentions for American booksellers, but I can't help but thinking that partnering up with the interests behind "Main Street" and parroting its PR simply smells rotten.

I feel like people I care about, the booksellers themselves, are being used as pawns by Wal-Mart, Target, Best Buy, Home Depot, Overstock.com and Barnes & Noble.

It's especially disturbing because the small retailers have been the ones most put to early graves by Wal-Mart and pals.

While getting the ABA to spin rhetoric to booksellers about creating a "level playing field" it's the so-called big box retailers that destroyed the real Main Street shops through competitive advantages - such as tax loopholes and Wal-Mart's notorious state tax avoidance schemes.

Basically, Wal-Mart is being hurt by online retailers and claims that online retailers have an "unfair tax advantage" so they're doing something about it.

At any rate - thanks for the extra tax, Wal-Mart. You may be selling it, but I'm not buying it.

Image by Kevin Dooley, under Creative Commons 2.0 Generic license, via Flickr.

Topics: Amazon, Hardware

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107 comments
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  • Amazon should not get a pass while other pay

    I don't want to pay extra if I don't have to .... but fair is fair.

    Just because Amazon is a web only store it should not mean that they should be except from paying taxes while everybody else must comply with state tax laws.
    wackoae
    • RE: Wal-Mart vs Amazon in California tax law battle: Booksellers in the crossfire

      @wackoae This is not about amazon paying taxes. It is about California consumers paying sales tax on items purchased from amazon. The irony here is that the 10,000 amazon affiliates probably paid more income tax to California than does (just a guess). The point is do not confuse income tax with sales tax.
      jhuddle
    • I like the part where she said that

      @wackoae
      [i]Californians already pay sales tax on their online purchases due to recent enforcement of the ?use tax? laws, where residents are required to declare what they owe in out of state online purchases on their tax returns[/i]

      Come on, how many people are going to put their online purchases on their tax return so that they'll have to pay the taxes? 5%? 10%?.
      William Pharaoh
      • RE: Wal-Mart vs Amazon in California tax law battle: Booksellers in the crossfire

        @William Pharaoh
        So, those people are responsible, not Amazon. Just because people are being dishonest doesn't mean the government gets to double dip.
        Droid101
      • But if Amazon does it, then the consumers won't have to

        @William Pharaoh
        so there won't be any double dipping.
        I pay sales tax at time of purchase in a store, so I'm not required to pay it on my tax form.

        Why should all the brick an morter stores have to do that, but online companies are exempt from it all?

        They should have to deal with the same rules that a brick and morter company does as they are selling the same products, basically running the same business, a retail establishment.
        William Pharaoh
      • RE: Wal-Mart vs Amazon in California tax law battle: Booksellers in the crossfire

        @William Pharaoh
        You miss the point of the tax...
        It would only apply to the Amazon affiliate sales where the affiliate sells from or resides in Cali.
        This does not affect normal Amazom purchases.
        This confuses things even more. How do you as a consumer know which is which? So Amazon has to track and provide you a statement to differentiate between Cali affiliate and all other sales?
        Oof! :(
        rhonin
    • Walmart "fair" American mainstreet?

      @wackoae
      What a joke! Swallow every mom and pop, then complain when competitions comes along!
      kd5auq
    • RE: Wal-Mart vs Amazon in California tax law battle: Booksellers in the crossfire

      @wackoae

      Yes it DOES mean that! Amazon doesn't use the local infrastructure in the town of the purchaser, so why should it or the consumer pay taxes to the consumer's town/county??? Brick and mortars add costs to those districts in the form of street work, traffic lights, water, sewer, police and fire protection, etc. Let Amazon pay for those itself to the municipalities where it has physical facilities! Again, taxes should only be paid where accompanying benefits are received by the payer in return!
      Techboy_z
      • RE: Wal-Mart vs Amazon in California tax law battle: Booksellers in the crossfire

        @techboy_z - hear hear.
        hiraghm@...
      • RE: Wal-Mart vs Amazon in California tax law battle: Booksellers in the crossfire

        @techboy_z BINGO! Amazon is not using any of the local infrastructure or anything else in the state, so there is no reason to pay sales tax on this. Companies delivering the products like UPS and USPS pay the required taxes for the shipping and that is it. Walmart and its politician friends should stop wining!
        mikies
      • RE: Wal-Mart vs Amazon in California tax law battle: Booksellers in the crossfire

        @techboy_z Amazon is not being ask to pay the taxes they are being made to collect the taxes. Can you argue that the people who bought the products don't use water, sewer, police, fire protection, streets? As a private business owner I have personally been undercut by online retailers, not because their prices are lower, they're higher!! But when the customer gets a 7 to 10% discount because they don't have to pay the sales tax it is impossible to be competitive. These online gimmics must be stopped if we are going to have any opportunity for a level playing field. Yes Walmart gets way to many tax breaks and that should be ended too, but in this instance they happen to be correct.
        drstory
      • RE: Wal-Mart vs Amazon in California tax law battle: Booksellers in the crossfire

        @techboy_z CA views Amazon as a CA company, due to the presence of its affiliates. It has physical facilities in CA, in CAs view anyway.
        reamon@...
      • RE: Wal-Mart vs Amazon in California tax law battle: Booksellers in the crossfire

        @drstory

        Actually, in CA Amazon is being asked to pay the taxes. In CA sales tax is levied against the seller not the buyer. CA permits sellers to pass the tax on to buyers as long as they tell the buyer they are doing so and the buyer agrees to the terms of sale.
        reamon@...
    • RE: Wal-Mart vs Amazon in California tax law battle: Booksellers in the crossfire

      @wackoae Amazon and brick & mortar (WalMart) doesn't pay taxes - consumers pay all corporate and sales taxes. Get a life! If you want to pay double taxes, that's your gift the a busted/over spending government. No me!
      jackadair@...
    • RE: Wal-Mart vs Amazon in California tax law battle: Booksellers in the crossfire

      @wackoae - I'm so tired of this "itso unfair!" mentality.

      Screw fair; Amazon not paying taxes in California is *just*.
      Just because the State of California is peopled with idiots, who put corrupt idiots in office, doesn't mean Amazon should have to pay the ridiculous taxes that California wants to collect to promote its socialist state.

      Is it fair that I, simply because I don't live in Idaho, don't have to pay Idaho State income tax? But, I eat Idaho potatoes! So obviously they have a "right" to take money from me, right? Wrong!

      Good for Amazon, and anyone else who can wiggle their way out of paying State (or even better, federal) taxes! The more we starve the beast, the weaker it will become until maybe places like California and Washington DC begin to realize that it's not their job to socially engineer the State/nation.
      hiraghm@...
      • RE: Wal-Mart vs Amazon in California tax law battle: Booksellers in the crossfire

        @hiraghm@... Amen!
        mikies
  • RE: Wal-Mart vs Amazon in California tax law battle: Booksellers in the crossfire

    "Californians already pay sales tax on their online purchases due to recent enforcement of the ?use tax? laws, where residents are required to declare what they owe in out of state online purchases on their tax returns. Passing the new tax law on top of the use tax law feels to me like double-dipping and dirty pool - and it?s called double taxation."

    I really have a hard time believing the state wants the tax twice. I suspect the new law is just a way to make sure they get it paid once instead of never.
    raleighthings
    • RE: Wal-Mart vs Amazon in California tax law battle: Booksellers in the crossfire

      @raleighthings - Have you read California's tax laws recently? We literally pay taxes on other taxes!!! Because of California, some ERP software tax software literally ask "Tax on Tax?" to verify.
      bobs@...
  • RE: Wal-Mart vs Amazon in California tax law battle: Booksellers in the crossfire

    Poorly researched story.

    First of all Overstock.com is not trying to push the new law. Overstock was on Amazons side.

    Second this is not a double tax and never has been.

    Where its unfair is when Amazon sells a $,1,000 TV to someone in California and that they do not include the use tax in the price. Never mind collecting it, they do not even tell you about it.

    You think your getting a TV for a $1,000 but if you own the state a use tax that isnt so.

    Amazon shouldnt have to collect the use tax but they should make it part of the price.

    Bottom line is that $1,000 TV Amazon sells people actually costs more.\

    Some lawyer should sue them for this unfair business practice.
    FloydSchneider
    • RE: Wal-Mart vs Amazon in California tax law battle: Booksellers in the crossfire

      @FloydSchneider
      Be careful when using "use tax" in an argument.
      This is a very sore point with folks in Cali. It plays like we are being double taxed.
      rhonin