June 26, 2009

Amazon issues more threats against vendors over calls for it to pay taxes like everyone else

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A growing array of state governments are going after Amazon.com because of its “tax avoidance schemes”: A week after the company threatened legislators in North Carolina and Hawaii for contemplating “legislation that would force e-commerce companies to collect tax if they have online marketing affiliates —- people who get a sales commission from links on their own Web sites,” the company has now threatened the California state legislature for the same thing.

According to a Wall Street Journal report by Geoffrey A. Fowler, Amazon sent a letter to “Gov. Arnold Schwarzenegger and leaders of the state assembly and senate” on Monday about California’s proposed law AB 178, calling it “unconstitutional” and “threatening to end its business with marketing affiliates in the state if legislation passes forcing the Seattle e-commerce company to collect sales tax from California customers.”

Frank Russo, a spokesman for the assemblywoman who proposed the bill, Nancy Skinner, “said the current laws are ‘manifestly unfair’ because they put brick-and-mortar businesses at a competitive disadvantage,” reports the WSJ. Says Russo himself, “The time is running out for tax avoidance schemes where companies purposely follow a business model that makes them scofflaws.”

“The California law is based on one passed by New York last year, which Amazon and Overstock.com Inc. have challenged in court,” notes the WSJ report. Skinner says in California,the tax could mean yearly revenues as high as $150 milion.

Amazon would not comment further, nor would they identify how many vendors they have in California. Meanwhile, Schwarzenegger, says an aide, “has been clear that he does not support any new tax increases.”

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

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