Amazon urges California referendum on online tax

Amazon, the world’s biggest online retailer, is set for a political fight in California after it called for a referendum on the state’s controversial move to tax online shopping.

The call is likely to sharpen a confrontation between Amazon and bricks-and-mortar rivals including Walmart, Home Depot and Best Buy, which have backed moves to make online retailers collect sales tax from shoppers.

California’s tax measure was included in the state budget passed last month as it struggles to reduce a $9.6bn deficit. Most US online shoppers do not pay sales tax, because the US does not have a federal tax law on e-commerce, but California is the eighth state to introduce a local tax.

The sales tax issue is laying bare tensions between traditional retailers and online rivals that have been steadily grabbing market share from them in recent years.

A referendum petition was filed last week by a California-based consultant who works for Amazon, which is itself based in Washington state.

Paul Misener, Amazon’s vice-president of global public policy, presented the issue late on Monday as “a referendum on jobs and investment”, after Amazon announced last month that it would cut ties with online advertising partners in California to escape the tax.

Mr Misener said in a statement: “We support this referendum against the recent sales tax legislation because, with unemployment at well over 11 per cent, Californians deserve a voice and a choice about jobs, investment and the state’s economic future.”

A lobbying group representing bricks-and-mortar retailers, the Alliance for Main Street Fairness, quickly hit back at Amazon.

“Amazon.com’s actions prove that the online-only retailer will say and do anything to maintain an unfair competitive advantage over brick-and-mortar businesses in California,” said Danny Diaz, spokesman for the alliance. “The lengths Amazon will go to evade collecting sales taxes – even spending tens of millions of dollars on a ballot referendum – should concern all Californians.”

The alliance’s members complain that a tax loophole has given online retailers an unfair price advantage and are calling for “a level playing field”. They include Walmart, Home Depot and Best Buy as well as Target, Sears and JC Penney.

Under the California tax measure, online retailers must collect a sales levy if they have a presence in the state, including a relationship with a local website that redirects shoppers in exchange for a fee.

Overstock.com and some smaller online retailers have followed Amazon’s lead in cutting ties with online advertisers in California, in an attempt to avoid having a tax presence.

Any individual or company can arrange a public referendum in California, but they must first show that there is sufficient support for the measure. Amazon will have to collect more than 500,000 signatures at least a month before any ballot.

California’s constitution has been changed multiple times over the years by successful voter initiatives and public referendums, which have extended the state’s constitution to the extent that it is now the third longest in the world, with only India and the state of Alabama having longer constitutions.