July 7, 2011

Kids, don’t try this at home: Amazon decides to break the law … again …

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Reactions to Amazon‘s anti-sales tax maneuvers in California, where Governor Jerry Brown just signed into law a measure calling for the company to collect sales taxes just like every other retailer in the state (see the earlier Moby report), have become volatile.

As numerous sources have noted, Amazon has decided to violate the law — which went into effect last Friday — and is refusing to collect taxes.

For example Andrew S. Ross reports in a San Francisco Chronicle story headlined “Amazon, Overstock thumb nose at California tax” …

So, I went online Friday looking to buy a copy of John Kenneth Galbraith‘s “The Affluent Society & Other Writings, 1952-1967.” Thought it might be timely to revisit the Harvard economist’s distinction between “private affluence” and “public squalor.”

Barnes & Noble‘s website was selling it for $26.53. Total, which included California sales tax: $28.79. “Total Before Tax” at Amazon.com: $26.40. “Estimated Tax To Be Collected: $0.00.”

…  In other words, screw you, California, and your laws.

As a Los Angeles Times report observes, companies only pay state taxes quarterly, which means Amazon doesn’t have to notify the state until October that it is not obeying the law. “Such defiance sets up a major legal battle by this fall,” says the report, “though Amazon could first challenge the law in court, as it has in New York.” Of course, Amazon lost that case, although that doesn’t seem to matter to the behemoth from Seattle as it forges ahead battling yet another state government that it disagrees with.

Lots of other e-retailers, though, are quite happy with the deal. Amazon’s leading internet sales competitor, Barnes & Noble, interestingly, has no problem with the sales tax requirement, and issued a press release in which CEO William Lynch thanks California for leveling the playing field. He says,

We thank Governor Jerry Brown for demonstrating his commitment to California businesses by signing e-fairness into law. This legislation will directly benefit California businesses by creating a fair marketplace. We believe that e-fairness will improve the economy, add jobs, and help struggling businesses everywhere in California. By signing this law, the Governor has made clear that his priorities are to help bolster economic recovery. This is a huge win for business in the state of California.

A Bookselling This Week report notes that the American Booksellers Association, the Northern California Independent Booksellers Association, the Southern California Independent Booksellers Association, and the Alliance for Main Street Fairness, all hailed the new law.

NCIBA head Hut Landon said “Our next step is to urge the BOE to enforce the new law and demand payment. We understand that the response from Amazon.com will most likely be a lawsuit, but that shouldn’t stop the BOE from doing its duty.” And Oren Teicher, ABA CEO, said, “Gov. Brown’s decision to sign the budget adopted by the legislature is excellent news in our decade-long fight to achieve sales tax equity in California.”

And a terrific report from Shelf Awareness details other retailers across the country who are elated with the California law. For example, it notes that “Bookshop Santa Cruz “has offered to pick up the California online sellers that Amazon has dropped [in retribution for the law] and pay them a 5% commission for books they sell on their websites. In a letter to customers, the shop called Gov. Jerry Brown’s new state budget and its tax on online sellers ‘a hard-fought victory for local bricks and mortar bookstores, pharmacies, shoe stores, bike shops and other local retailers.'”

As the Shelf Awareness report also notes, the site Geekwire says the response to Amazon’s antagonistic response to the law — particularly to firing its affiliates in the state — amounts to a “guide to why Amazon is losing the tax battle.”

It continues to iterate that Amazon “has put no human face on its efforts. They’ve completely missed the opportunity to highlight hundreds of small entrepreneurs, bloggers and business owners who earn revenue from Amazon links. They could use these people as examples of who will be hurt in this fight…. The tax issue will either resolve itself in the form of a national movement like the Streamlined Sales Tax Project. Or, certain states will start to position themselves as ‘Internet-friendly’ tax havens. But regardless of what happens with the tax, Amazon has squandered so much and gained so little in return.”

Dennis Johnson is the founder of MobyLives, and the co-founder and co-publisher of Melville House.

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