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What the New Amazon Sales Tax in California Means for Small Businesses

By | 09.19.12

What the New Amazon Sales Tax in California Means for Small Businesses

As of 12:01 a.m. on Saturday, September 15th, the world’s largest online retailer, Amazon.com, started collecting state and local sales taxes on California purchases. This controversial development comes as a result of deal that Amazon struck with Gov. Jerry Brown, where the company promised to open two 1-million-square-foot distribution centers in Northern and Southern California, and start charging sales tax.

California consumers are said to be divided on the Internet sales tax issue. While some see it as unnecessary, others see the sales tax as a matter of fairness, since consumers have to pay a sales tax in California when they go into a brick and mortar store anyway.

Several business owners are welcoming the change. In Napa, shop owners are eager for even the smallest leveling of a playing field that they share with a company that pulled in more than $48 billion in revenue last year.

In the past, many brick-and-mortar retailers feared that their shops would one day become nothing but showrooms, where visitors would peruse their products but purchase them online for less money. In May of this year, the Target chain actually expelled Amazon’s Kindle tablet computer line from its stores, complaining that most customers sampled the e-readers at Target, only to buy them directly from Amazon. With Amazon and even other online retailers in California now charging a sales tax, merchants predict that more customers will lean more towards instant gratification rather than waiting for an order to be shipped from a distributor.

As Napa shop owner Victor Pedroza stated, “Now that they’re being taxed either way, why order (online) when they can come here and take it home the same day? A lot of people would buy it on Amazon just because of the taxes, now this makes it a fair game.” Mike Barnard, president of the Northern California Independent Booksellers Association, recognized that even if Amazon can send books, televisions, or pet food to buyers the next day, the burden of doing so could bring Amazon and other major-label Internet retailers closer to small stores’ level.

Though this development is considered a success by many individuals and small businesses, the fight over Internet sales tax is not over. According to Bill Dombrowski, who is the president of the California Retailers Assn., now that Amazon has agreed to collect sales taxes in California, the challenge is to persuade Congress to pass a federal law that would set standards for collecting similar levies in every state that has a sales tax.

Retailers have waged a campaign in regards to Internet sales tax in New York, Illinois, California, and other small states, in an effort to get politicians in Washington D.C. to take notice. Dombrowski says that in the meantime, the passage of the California law could mean the difference between survival and bankruptcy for many small business owners.

References:
Lifsher, Marc. “Amazon, other Web retailers start collecting California sales tax” 9/15/12 (9/18/12)

Freeman, Kate. “Amazon Sales Tax- What it Means for You” 7/28/12 (9/18/12)

Yune, Howard. “Local stores hope for gain as sales tax comes to Amazon” 9/14/12 (9/18/12)

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