Amazon Rallies Affiliates to Fight Tax

JULY 12, 2011

By JOHN SEILER didn’t waste time in working to repeal the so-called “Amazon” tax. The tax was passed last month by the Democratic-controlled Legislature and signed into law by Democratic Gov. Jerry Brown. The tax is supposed to raise $200 million a year.

But Republicans, in particular Board of Equalization member George Runner, pointed out that the tax would kill thousands of businesses, which then would stop paying income, sales, property and other taxes. Effectively, it’s a negative tax — destroying more revenue than it brings in.

In my article on the Amazon tax — which is what Democratic staffers in the Capitol call it, even though it also affects many more companies — I wrote about my friend Gary Metz, an Amazon affiliate. Along with 10,000 other affiliates, after the tax was imposed Amazon “fired” him. Another 15,000 affiliates were “fired” by out-of-state companies other than Amazon.

Metz just forwarded to me the letter Amazon is sending fired affiliates like him. It reads (boldface in original):

Comment on California Jobs Referendum from Paul Misener, vice president, Amazon Global Public Policy

This is a referendum on jobs and investment in California. We support this referendum against the recent sales tax legislation because, with unemployment at well over 11 percent, Californians deserve a voice and a choice about jobs, investment and the state’s economic future.

At a time when businesses are leaving California, it is important to enact policies that attract and encourage business, not drive it away. Amazon looks forward to working again with tens of thousands of small business affiliates in California that were harmed by the new law’s effect on hundreds of out-of-state retailers.

As Governor Brown has made clear, it is important to directly involve the citizens of California in key issues and we believe that Californians will want to vote to protect small business and keep jobs in the state.

Amazon’s Strategy

Amazon obviously is not a dumb company. It’s being polite toward Gov. Jerry Brown, even though he has attacked the company.

Amazon is located in Washington State, where initiatives and referendums also are common, and decide major issues. So Amazon knows how the process works — although California’s process, of course, is a little different from Washington’s.

Amazon has a ready-made anti-tax constituency: those 10,000 fired affiliates. It has their emails. It easily could get their testimonies for TV ads boosting an initiative.

Moreover, Amazon knows that the whole country, even California, is in a foul, anti-government, anti-tax mood. Governments at all levels — federal, state and local — are badly managed, have spent and borrowed way too much, and now are seeking to put the thumb screws to taxpayers once again.

It’s true that, in California in November 2010, that anti-government, anti-tax sentiment was severely diluted. The Tea Party anti-tax movement hardly made a wave here. Democrats, after the election, said California’s “firewall” stopped the Tea Partiers at the state border.

But eight months is a long time in American politics. Last November, anti-tax activists here were handicapped because the sitting Republican governor, Arnold Schwarzenegger, had increased taxes. And the Republican candidate to replace him, Meg Whitman, ran one of the worst campaigns ever.

All that’s in the past. Arnold has become an object of ridicule for treating his marriage vows as seriously as he did his vows to Californians that he never would raise taxes. His 2009 tax increases were supposed to solve the state’s perennial budget shortfall. They didn’t.

And this year, unlike in 2009 when four members defected to the pro-tax side, Republicans in the Legislature stood solid against tax increases. Where Arnold could seduce some of them to stray, Jerry Brown couldn’t.

Next Year

The Associated Press reported on Amazon’s plans for next year:

A petition for a referendum was filed Friday with the state Attorney General’s Office so that voters can decide on the requirement, which was included in a state budget signed into law in late June.

Supporters must now gather around 434,000 signatures to qualify it for the ballot, according to the state Attorney General. A vote could occur during the next statewide election in June 2012.

The big battle will be between Amazon and the big-box stores that favored the Amazon tax, especially Walmart and Target. The big-box stores say that it’s unfair for Amazon to avoid the California state sales tax, effectively giving Amazon an 8 percentage-point advantage in pricing.

But these big-box stores themselves manipulate the government. They sometimes use eminent domain and redevelopment to get sweetheart property deals. And I remember how Walmart, a decade ago, manipulated the Huntington Beach City Council to get a 75-year lease on an unused school property — which included a clause that Walmart could opt out any time it wanted, but the city and school district were locked in.

And Walmart complains when unions manipulate the government to stop new openings of Walmart stores because the company mostly is not unionized. But when it comes to using California’s government to clobber an out-of-state rival, Walmart is all for that.

Amazon’s TV ads for the initiative no doubt will feature victimized affiliates. They’ll be Mom and Pop types whose livelihoods were destroyed by Gov. Brown’s new tax.

Walmart and the other big-box stores will fund ad campaigns talking about “fairness” and how state needs the tax money to fund schools, roads, police, firemen, etc.

This is a tough one to call. About two-thirds of statewide initiatives fail in California. But I think this one likely will win because there’s been a lot of buzz on the issue. Here at, our articles on the Amazon tax have gotten a record number of comments from readers.

Even though most people aren’t affiliates, millions of Californians do buy from Amazon, and like the company. And today’s anti-tax mood will be even stronger next year.

Finally, if Amazon really wanted to play hardball, it could start a movement to recall Gov. Brown. Put that on a June ballot with an Amazon tax cut, and the fireworks really would begin.





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  1. Brandon Castillo
    Brandon Castillo 12 July, 2011, 09:36

    Remember, a referendum is asking the voters to vote “yes or no” on the new law. So even though they are the sponsors of the referendum, Amazon and their allies will be asking for a “no” vote to reject the new tax. Thus, they are in a much stronger position.

    Reply this comment
  2. John Jorsett
    John Jorsett 12 July, 2011, 12:30

    I think this is a strategic blunder. Even if successful, a referendum leaves the legislature and governor the opportunity to pass the law yet again. Rather than have to fight this battle repeatedly, Amazon would be better off backing an initiative to get the law changed permanently.

    Reply this comment
  3. So. Perry
    So. Perry 12 July, 2011, 16:02

    Don’t you think it’s unfair for one business to able to sell things in California without paying sales tax while the another business selling the same thing does have to pay sales tax? Don’t you think that an increase in sales by actual stores, made by actual employees, could offset job losses from Amazon affiliates? Don’t you think that the potential initiative campaign – with Walmart bidding against Amazon to decide what the law will be – will be the clearest demonstration yet that our direct democracy has devolved into a corporate oligarchy?

    Reply this comment
  4. Larry
    Larry 13 July, 2011, 14:10

    No Perry, I don’t think it’s unfair. California companies have to collect and remit California taxes; Washington state companies have to collect and remit Washington state taxes. Amazon is a Washington state company.

    If California companies had to collect and pay Washington state’s taxes, then it would be “unfair”, but California companies don’t have to do that. But that’s what will happen if the California legislators win this fight. Amazon, and California companies, will have to collect and remit sales taxes in every state, even if they, like Amazon, don’t have nexus in those states.

    Reply this comment
  5. Richard Rider
    Richard Rider 14 July, 2011, 11:02

    Perry, I think you are missing a key point — Amazon is STILL not paying the sales tax. In that regard, nothing has changed.

    The people REALLY harmed are the thousands of CA business owners and employees who no longer can work with Amazon (and with scores of other Internet companies such as

    I guess we should include CA state and local governments as being “harmed,” as the CA damaged businesses will shrink, disappear or move elsewhere — reducing our state’s tax base.

    So the Law of Unintended Consequences holds sway here. It is truly a “lose-lose” (and lose some more) law, perhaps the dumbest piece of legislation since the 1990’s bogus electricity deregulation bill.

    Reply this comment
  6. calif2
    calif2 14 July, 2011, 11:14

    The fact is what is fair or not fair but taxes. The people of California are taxed when they earn their money and taxed when they spend it and taxed when they save it. They do not tax grocery foods but they tax the bags you carry it out in. The fact is that it is not only business leaving the golden state but anyone with an IQ above 50 is going too. Only undocumented Democrats are moving here waiting for amnesty or a chance to get into our country club prisons. We the tax payers are so screwed that it has become hopeless.

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