Amazon Runs For Office In California

Amazon (NASDAQ: AMZN) faces a sales tax in California that it is not willing to pay. As a result, its relationships with affiliates in the state became strained, and the company will likely face a major suit by the state government.

The world’s largest e-commerce company hopes to turn to California’s voters for relief. It needs 504,760 signatures by September to get on the state ballot a measure that would repeal the state tax that requires online retailers to collect sales taxes. The vote will be on February 7th, if Amazon can manage the qualification process.

Amazon’s argument to the voters is clear but is also convoluted. The company claims that jobs will be lost as it ends ties with thousand of sales affiliates in the country’s largest state by GDP. Amazon would also close any distribution centers it has there.

Big-box retailers like Wal-Mart (NYSE: WMT) and Target (NYSE: TGT) do not want Amazon on the ballot, and if it manages, they want to see the measure defeated. Amazon, they claim, has an unfair advantage because it does not add tax to the purchase prices of goods and services bought in California. No one knows what the state would gain financially if Amazon paid full sales tax. Governor Jerry Brown puts the amount at over $300 million.

The levying of the tax may mean the loss of some jobs in the state, but the collection of the tax may add or save some. California’s multi-billion deficit has caused the state to lay off tens of thousand of workers. Companies that work for the state have been financially harmed as well.

Whatever stimulus measures California can mount to reverse its economic decline also depend on the size of the state’s tax receipts. It is overly simplistic to say that Amazon can save more jobs than the state can create. That point has not been made, but California should make it.

Douglas A. McIntyre