California Governor Signs Amazon Tax

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California Governor Signs Amazon Tax

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Strapped for cash and crushed by debt, the last thing you'd think a state would do is defer sales tax legislation. That is exactly what happened when Governor Jerry Brown recently signed the Internet sales tax bill into law. But wait, there's a twist: the state reached a compromise with Amazon and delayed collection of the taxes for a year.

As you may have guessed, Amazon played a major role in the delay. They agreed to end their campaign eliciting support for a ballot measure to overturn the law. California is Amazon's biggest market and they did not want to risk losing their affiliates in the state. Had the bill taken effect immediately, many online California businesses might have fled to neighboring states.

Over the next year Amazon will attempt to work out deals with its California-based affiliates. During that time, however, Amazon could shift to a pay-per-click arrangement rather than its current affiliate relationships. It is difficult to predict just how the scenario will play out. In the meantime, California is out over $200 million in sales tax revenue.

As written, the original bill required online retailers to collect California sales tax if they had any type of business operation within the state. Before the initial start date, Amazon terminated all business relationships with their affiliates in the state. Unfortunately, that negatively impacted the meager income of your humble correspondent.

Part of the deal Amazon cut with California, involves Amazon building several storage warehouses that will employ 10,000 full-time and up to 25,000 seasonal workers by 2015. Amazon has plans to invest up to $500 million in California distribution centers over the next few years.

Amazon's plans were not just a political ploy to delay the tax. By investing in the state, Amazon will save money on shipping as well as provide significantly faster delivery.

At this point it appears both Amazon and California can declare themselves winners in this battle. That is, unless something changes in the next year. In California, that is always a possibility.

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Tags: • distribution • warehouses • revenue • affiliates • sales • amazon • governor • online retailers • california businesses • internet sales • sales tax • amazon tax • pay per click •

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