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Amazon offers to build facilities in bid to end sales tax fight

The Internet giant proposes investing up to $500 million in at least two new distribution centers and hiring as many as 7,000 workers if California lawmakers temporarily stop trying to force the retailer to collect state sales tax.

September 01, 2011|By Marc Lifsher, Los Angeles Times
  • Katherine Braun sorts packages at an Amazon.com fulfillment center in Goodyear, Ariz.
Katherine Braun sorts packages at an Amazon.com fulfillment center in… (Ross D. Franklin / Associated…)

Reporting from Sacramento — Amazon.com Inc. is offering to build at least two distribution centers and hire as many as 7,000 workers if lawmakers back away — at least temporarily — from trying to force the Internet giant to collect sales taxes on purchases made by California customers.

The proposal, along with promises to invest as much as $500 million in the new facilities, was made in the form of draft legislation at a meeting Tuesday night between Amazon lobbyists and representatives of companies that belong to the California Retailers Assn.

The retailers trade group and other supporters of California's effort to collect more than $300 million a year in unpaid taxes on Internet sales dismissed the Amazon compromise as a ploy.

"The so-called deal that Amazon has proposed is not serious," said Bill Dombrowski, president of the retailers group. Lenny Goldberg of the California Tax Reform Assn. called it "a totally cynical maneuver that's part of the game that they try to play in every state."

According to an informal memo obtained by The Times, Amazon wants the state Legislature to repeal a law that took effect July 1. The statute requires Amazon and other out-of-state Internet sellers to collect California sales taxes.

Amazon, so far, has said it would not collect the taxes and has spent more than $5 million on a referendum campaign that would ask voters to rescind the law.

Amazon wants California to refrain from forcing it to collect sales tax until at least January 2014, giving Congress time to come up with a federal law that would replace the growing number of state statutes on the matter.

In return, Amazon would hold the signatures it's already collected and drop its effort to repeal the sales tax collection law on the June 2012 ballot. Amazon also would build fulfillment centers in Northern California and Southern California.

Amazon further offered to send its customers annual statements listing their total purchases and advising them that they owe California use tax on the goods, the memo said.

The use tax, paid by the buyer, is the same basic statewide rate of 7.25% for the sales tax.

Ned Wigglesworth, a spokesman for the Amazon referendum campaign, declined to discuss the matter.

The impetus for the new talks came from a meeting between Amazon lobbyists and Senate Minority Leader Bob Dutton (R-Rancho Cucamonga).

"Sen. Dutton encouraged the individual retailers and their association and Amazon to get around the table and try to work out a deal that would be a win-win-win for the retailers, Amazon and the people of California," said spokeswoman Jann Taber.

However, Dutton's counterpart, Senate President Pro Tem Darrell Steinberg (D-Sacramento) is more skeptical.

"It's an intriguing idea, but it's late in the session," said Steinberg spokeswoman Alicia Trost. "There's a whole host of obstacles and no legislation yet."

Steinberg told reporters that he is putting most of his time and energy into an attempt to pass a new Internet sales tax bill that would nullify the Amazon referendum before the Legislature goes out on recess Sept. 9.

The nullification bill, though, faces difficulty because it needs yes votes from two-thirds of the members of both houses of the Legislature. That would mean that two Republicans in the Assembly and three in the Senate would need to vote with Democrats, who control both houses.

Anti-tax activists in both the state and in Washington are urging votes against the proposal, calling it a tax increase.

Gov. Jerry Brown is counting on getting at least $200 million in revenue from the Internet sales tax to balance his budget. An additional $117 million from the tax would go to local governments.

A spokesman for Brown declined to comment on the Amazon proposal.

marc.lifsher@latimes.com

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