September 08, 2011 11:52 PM UTC

Amazon Losing Sales Tax Battle?

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• by: Colorado Pols

Big developments in the last 24 hours in the long-running battle between the state of California and online retail giant Amazon.com–the Los Angeles Times reports, H/T to John Tomasic of the Colorado Independent:

Under the deal, Amazon would delay collecting taxes until September 2012, Assemblyman Charles Calderon (D-Whittier) said. The new law had mandated that Internet retailers start collecting state taxes in July if they had offices, workers or other connections in California.

Amazon had refused to collect the taxes and poured $5 million into collecting signatures for a ballot referendum challenging the law.

If Congress acts by next summer to settle the contentious issue of how online retailers should be taxed, that decision would override Amazon’s deal with California…

Adds Tomasic:

The California deal will likely open the floodgates in states across the country, where untapped billions await in sales taxes that have gone uncollected for nearly two decades.

When Colorado tried to force Amazon to collect sales taxes, the company thinned ties with the state as a way to bolster legal standing for its anti-sales tax position. Mainly, it ended its Colorado affiliate program, where website owners here receive small commissions by referring surfers to Amazon to buy things. Cutting physical ties is an approach the company has taken in Texas, as well, where it shuttered a distribution center. The company, however, has more substantive ties in California, where for example it manufacturers its Kindle readers through a contractor company…

In February, the Seattle Times called out Seattle-based Amazon for the “slick strategy” it has adopted in dodging sales taxes “all across America.” The paper’s editorial board noted that the company had enjoyed the benefit of tax-free status long enough. Its roots were solidly planted. It is now one of the most successful companies in the world. The board wrote that the time of reckoning was drawing near.

We’ve said it over and over: the battle between states who need revenue and online retailers who benefit from tax-free sales is about one thing and one thing only–competitive advantage. Local retail businesses around the nation, like those represented by the Colorado Retail Council, are the losers against giant online retailers who don’t remit tax. And we’ll say it again: the politicians who cite the battle over Amazon as evidence that Colorado is not “business friendly,” like Rep. Amy Stephens, are actually advocating against Colorado business.

Though perhaps not for very much longer.