Lawmakers Seek Online Sales Tax Compromise

SACRAMENTO (AP) -- California lawmakers on Thursday were crafting a compromise bill with Amazon.com that would delay until next year a law forcing Internet retailers to collect sales tax on online purchases.

If approved by Friday, the last day of this year's legislative session, the bill would mark an acknowledgement by Amazon that it should collect the sales tax for the state just like any retailer with shops in California.

Senate President Pro Tem Darrell Steinberg said lawmakers would delay implementing the law collecting sales tax until Sept. 15, 2012. Amazon has threatened to seek a repeal at the ballot box next year. The company has spent more than $5 million toward a 2012 ballot referendum to overturn the law requiring Internet sales tax collection.

The delay would allow time for Internet and traditional retailers to lobby Congress for a national solution for collection of taxes from large Internet retailers. It would also allow the state to avoid a drawn-out fight.

"What the state gets out of the Amazon agreement is certainty," said Steinberg, a Democrat from Sacramento. "The state was at risk of never being able to collect the sales tax if a referendum is legal and if it were to win."

Traditional retailers have agreed to the deal and were working with lawmakers and Amazon on legislation late Thursday.

"We are reviewing language and trying to come to a deal," said Bill Dombrowski, president and chief executive of the California Retailers Association. "Right now we have parameters, but this is the end of session and everyone has to see the actual language."

Amazon spokeswoman Mary Osako said the Seattle-based company would have no comment.

Gov. Jerry Brown, a Democrat, said Thursday that he was aware of the agreement but did not have a chance to assess it yet.

Under the budget package approved by Brown and Democratic lawmakers, the state had adopted a law to collect an additional $200 million annually in tax from online sales. The Legislature passed a similar law in 2009, but then-Gov. Arnold Schwarzenegger vetoed it.

Steinberg said he's unsure how the state will make up that loss by not collecting the tax for a whole year.

"It's not perfect," he said. "We'd love the tax to be collected now but Sept. 15 is a whole lot better than the risk of never."

California is among a growing number of states that have turned to such measures in hopes of bringing in more tax revenue.

Billions of dollars are at stake as a growing number of states look for ways to generate more revenue without violating a 1992 U.S. Supreme Court ruling that prohibits them from forcing businesses to collect sales taxes unless the business has a physical presence, such as a store, in that state. When consumers order from out-of-state retailers, they're supposed to pay the tax that is due, but they rarely do and it's difficult to enforce.

States are trying to get around the Supreme Court restriction by passing laws that broaden the definition of a physical presence. Online retailers, meanwhile, are resisting being deputized as tax collectors.

According to the Performance Marketing Association, there are 200,000 affiliates across the country, 25,000 of which are located in California. Those affiliates received fees varying from 4 percent to 15 percent of each sale they brought to the company.

Amazon cut ties with them after the law's passage.

The company also has dropped affiliates in Arkansas, Connecticut and Illinois after similar sales-tax collection laws were passed there. Overstock, which is based in Salt Lake City, also has shuttered its affiliate programs in several states due to the laws.

Amazon does collect sales taxes in North Dakota, Kansas, Kentucky and its home state of Washington. It collects in New York, too, as it fights the state over a 2008 law, the first to consider local affiliates enough of an in-state presence to require sales tax collection.

Some Republican lawmakers said they would support the compromise because it allows time for retailers to lobby Congress for a national policy.

"For California, it's a win-win in the long term," said Sen. Bob Huff, R-Diamond Bar.

(Copyright 2011 by The Associated Press. All Rights Reserved.)