Quick, show of hands: who wants to pay more in taxes?
That’s what I thought.
Clearly, Amazon.com is right.
The online retail giant is planning on asking voters to chime in on whether they want to pay more in taxes. Okay, not exactly. They’re really asking voters in California to overturn the controversial new state law requiring companies to collect sales tax from customers if they have actual operations or sales affiliates in the state.
Getting the law overturned isn’t as easy as asking for a show of hands, however. There is a legal process to get the measure on the ballot. Laws that have already been passed in the state can be effectively vetoed by a referendum (sometimes called the “people’s veto”). To get on the ballot as a referendum, a referendum petition must have been signed by at least 5% of the number of voters in the previous gubernatorial election. That means that Amazon has to collect 504,760 signatures to get the measure on the next ballot. Once they turn those signature in, the Secretary of State has to randomly verify a number of the signatures. If the numbers stand, the referendum qualifies to go on the ballot. Once on the ballot, the law is repealed if voters say no more times than they say yes – in other words, a simple majority rule.
The whole process takes some effort which is why it doesn’t happen very often. Getting the word out and getting signatures and votes requires a public platform and some cash. Fortunately for Amazon, it has both.
What it doesn’t have is time. To date, Amazon has refused to collect the tax under the new law, which was effective on July 1. It believes that the new law is unconstitutional and it wants voters to agree.
That kind of thinking makes me nervous. I’m all about democracy. And if the voters decide that forcing online merchants to collect sales tax based on the presence of affiliates is not good tax policy, then by all means, they should be allowed to say no. That’s what votes are about – making your voice heard.
But if it’s a question of constitutionality, that’s something that the courts should decide, no? Realistically, most voters in California – heck, in any state – haven’t actually read their own constitution. That’s not judge-y. It’s a fact. I’ll totally admit that I haven’t read the entire Pennsylvania constitution – and I’m a lawyer.
But court cases, however, can be expensive. And long. And ugly. And Amazon must think their chances are better in the court of public opinion. And they’re likely right.
Courts have struck down admittedly ongoing challenges to similar laws in places like New York. So, Amazon is well aware of the risks. The odds are probably best for them by just asking the public. And why not? Customers in the state are getting the equivalent of a 10% discount if they avoid the tax altogether even though, in theory, if they don’t pay the sales tax at purchase, they should pay the use tax (pardon me while I grab my sides as I chuckle heartily on that one).
Brick and mortar stores in the state are crying foul at Amazon’s attempts to get out of collecting the tax. And it’s not just mom and pop stores. Big names like Target, Wal-Mart and Home Depot have found themselves side by side with smaller retailers that they once endeavored to run out of business in support of the new law. What is it about politics and bedfellows again?
Of course, while those big name retailers have the resources to throw at a campaign to prevent the law from being overturned (and trust me, dollars will fly), others hope that it won’t be necessary. It’s a question of equity in the minds of many. Those folks, like Betty Yee, who sits on the California Board of Equalization, are hopeful that Amazon will give up on efforts to block the tax. Yee issued a press release (downloads as a pdf) after the passage of the new law calling on Amazon “to do the right thing and work with the state of California to comply with the law.”
Let’s see that show of hands again… Yeah, Amazon giving up on this one doesn’t look very likely.