published Sunday, July 24th, 2011

Texas, California pinch Amazon

Tennessee Gov. Bill Haslam may think he’s calmed the controversy over Amazon’s unfair refusal to collect sales taxes on purchases by Tennesseans when it opens its two planned distribution centers here. But he hasn’t. That controversy is intensifying in two of the nation’s largest states — Texas and California. Reverberations from events there will ricochet here.

Amazon announced less than two weeks ago that it would mount an initiative in California to put a statewide referendum on the ballot to let voters decide whether the state should be allowed to require online retailers to collect sales taxes on purchases made by their state’s residents. The announcement, a month after California adopted a law requiring online retailers to collect sales taxes on in-state purchases, predictably ignited debate at all levels.

State and local officials and brick-and-mortar retailers, who reasonably argue that its unfair to allow the soaring online retail business to operate in a sales-tax-free milieu, are outraged by Amazon’s proposal — and threatened by the possibility that it might pass. Some myopic Californians, to be sure, likely would vote in favor of such a restriction out of shortsighted self-interest in avoiding sales taxes.

Then last week, Texas Gov. Rick Perry signed into law a measure similar to the one adopted in California. It requires online retailers operating in Texas to collect and remit state sales taxes on their online sales to Texans.

The new laws should prompt similar legislation in Tennessee. Such a bill was proposed in the legislative session earlier this year, but it was deferred just before the session ended. A subsequent ruling by the state attorney general said the law would be constitutional. That confirmed its viability. With laws now on the books in California and Texas — and a few other states — to level the playing field for bricks-and-mortar retailers, it should gain more support.

Amazon officials may think voters will act purely on selfish interests and kill the online sales tax collections in California. But the company is running a huge risk. There’s a greater chance that voters will recognize that Amazon wants to plunder California for sales that undercut its bricks-and-mortar retailers, and take its profits out of the state without contributing to the state’s infrastructure — even as it threatens the jobs of Californians who work at local retailers and robs their communities of sales tax revenue.

When voters see projections of the pernicious consequences over time as online retailers grow and put local retailers out of business, they should see the fairness of the new laws in California and Texas.

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