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Yesterday, California governor Jerry Brown signed a new sales tax law that served as a loud shot across the bow of, the world’s largest internet retailer. Amazon founder Jeff Bezos is no dummy. He has built a massive retail empire that sells just about anything (including a huge amount of fake autographs — but that’s a topic for another day) to just about anyone, shipped to just about anywhere in the world. Part of Amazon’s success story is its reliance on a 1992 Supreme Court ruling that retailers are only required to collect sales tax in states in which they have a physical presence.

Amazon, however, has been playing fast and loose with this interpretation almost since it was a mere twinkle in the eye of Mr. Bezos. For example, Amazon has massive, multi football field sized warehouses in states that its legal department claims are not physical presences — because they are owned by Amazon “subsidiaries.” Yes, these are the same warehouses that ship the books and DVDs you buy from Amazon, but thanks to their legal shell game, Amazon claims it doesn’t have to collect billions of dollars in sales tax across the country.  State after state has declared through legislation and litigation that enough is enough — California being the latest.

Amazon has offices and thousands of affiliates in California, not to mention the developer of its best selling Kindle is based in Silicon Valley. As it did in other states, Amazon is cutting ties with California affiliates. But according to the new California law, that isn’t enough — Amazon is still responsible for collecting sales tax, but you can count on Amazon to sue.  If California was its own country, it would be the world’s 8th largest economy, so the sales tax issue is a much bigger deal than in other states.

Everyone loves bargains and no one wants to pay sales tax if they don’t have to. As a small California internet retailer myself, I would rather not collect sales tax if I didn’t have to, but I do and always have. If I were to adopt Amazon’s questionable ethics, I would incorporate in Nevada, get a PO Box in Las Vegas and claim I was now only responsible for collecting Nevada sales tax.

The bottom line is that Amazon has been “legally” evading sales tax across the country for more than a decade now, and it’s time the playing field was leveled. Yes, I know that the money pushing these “anti-Amazon” sales tax laws is coming from big box retailers like Walmart, who have their own ethical issues. However, in this case they are on the right side of the law. ALL internet retailers that have physical presences in California, regardless of size, should be required to collect California sales tax, whether it’s, or


2 Responses

  1. I agree. It has to be fair for all across the board, and Amazon has already destroyed many small businesses by outselling them, cancelling affiliate contracts, and removing warehouses to states with no sales tax. None of us want to collect the tax because customers don’t want to pay them. But sales taxes are what help states to keep needed government programs going. Amazon has made it clear it is above the law, so it’s time the AGs of the affected states stepped up.

  2. Thanks for your comment. Amazon has proven that it will do anything to avoid collecting sales tax. Isn’t it ironic that Amazon threatens to close or not to build warehouses in states that want Amazon to collect sales tax, and yet Amazon claims these same warehouses are owned by subsidiaries and therefore can’t be considered physical presences?

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