Whether Amazon.com makes good on its threats is very much an open question. Should California pass legislation that makes clear Amazon's network of affiliate marketers establishes nexus (a home location for tax purposes) in the state, it is far from certain that Amazon will abandon a marketing strategy in California that underpins much of its sales and customer acquisition efforts.
While Amazon's future moves are pure conjecture, what is clear is that Sen. Runner's assertion the company's threatened preemptive strike poses "an imminent threat to California jobs" has no basis in fact. Rather, it is Amazon's refusal to obey existing state law by collecting sales tax that is costing California jobs and revenue.
By allowing Amazon and other online retailers to exploit a decades-old loophole in the law, more than 18,000 jobs are now being lost to online sales, and California retail businesses are losing $4.1 billion in sales, which will have caused a total of $7.2 billion in lost economic activity in 2010. Clearly, Amazon is willing to fight very hard to maintain the critical strategic advantage it has over the thousands of in-state retailers that do collect sales tax, but California's leaders should not let bluster and intimidation shape important public policy or legislation.
Looking ahead, if Amazon terminates its affiliates, those marketers that are truly building businesses and creating jobs can quickly affiliate themselves with scores of major retailers that currently work with thousands of California affiliates — and which are collecting state sales tax. Their business will go to retailers that win it in an equitable and competitive marketplace, not by legal slight of hand and attempted intimidation. In the end, the state's revenue and jobs will increase by leveling the playing field with e-fairness legislation.
As an independent business owner that does collect sales tax, both in my brick and mortar bookstore and online at Keplers.com, I strongly urge the senator to reconsider his position and to support the sensible reform of California statutes to help ensure the fair competition that will, in the end, better serve California residents and help maintain critical governmental services.
I encourage Almanac readers to add their voices and let Senator Runner know what you think. Write or e-mail:
Hon. George Runner, California State Board of Equalization, 400 Capitol Mall, Suite 2340, Sacramento, CA 95814
Clark Kepler manages Kepler's Books and Magazines in Menlo Park.