California May Grant Amazon One-Year Tax Reprieve

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Sacramento, Calif. - could be exempt from collecting sales tax in California for another year under a tentative deal reached last night with lawmakers.

The tax, which was enacted by Gov. Jerry Brown in June and set to go into effect in July, targeted out-of-state e-tailers with offices, employees or affiliates in California.

Amazon has refused to pay the tax, dropped its approximately 10,000 third-party sellers within the state, and has been collecting signatures for a ballot referendum to overturn the law.

Under the deal struck with legislators, Amazon would delay collecting taxes until September 2012 and drop the referendum effort, the Los Angeles Times reported.

It is unclear whether Gov. Brown will support the agreement, which would have a positive impact on California's brick-and-mortar merchants and, observed Credit Suisse retail analyst Gary Balter, retailers nationwide, should other states adopt the tax model.

Balter said in a research note that the effect would be even greater within the CE and home office channels, where e-commerce sales account for well more than 20 percent of revenue.

"While Amazon contends that their sales penetration is the same in the states where they already collect taxes, paraphrasing Shakespeare, ‘Me thinks [they] doth protest too much,' " he wrote.


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