As desperate States struggle to balance their budgets, California’s Legislature plans to place a bid on the governor’s desk this month in hopes of reaping up to $150 million annually for state and local coffers. The proposal would force Amazon to start collecting tax from their customers. The revenue is tiny in comparison to the state’s $20-billion deficit, but supporters say every dollar counts in tight times.
The online retail giant has enjoyed an edge over many competitors in the state because it is not required to collect sales tax from residents who buy books, top-of-the-line plasma televisions, cases of diapers and thousands of other products from its website. The Seattle Corporation has no store, warehouse, office building or other physical presence in California, and the state cannot tax such businesses under a 1992 Supreme Court decision.
New York launched the initial tax on Amazon sales in 2008. North Carolina and Rhode Island have passed similar laws; other proposals have advanced in the statehouses of Virginia, Illinois, Colorado and Hawaii.
California Gov. Arnold Schwarzenegger vetoed a similar effort last year after Overstock .com announced it would cancel all its contracts with affiliates in California. Overstock backed down after the governor’s veto, but renewed his vow to cancel the contracts if the new measure becomes law. Amazon also said it would cancel its California contracts if the proposal goes through.
In Washington, Gov. Chris Gregoire rolled out a package of proposals last week to balance a $2.8 billion budget deficit with a combination of taxes, fund transfers and federal money. The various proposed taxes include taxes on candy, bottled water and soda, and raise taxes on toxic substances like petroleum as part of a “balanced approach” to the worst economic times in more than 70 years.
Gov. Gregoire urged the Legislature to fill a $2.8 billion hole in the state budget by making about $1 billion in cuts to programs, services and employee costs; raise about $605 million in taxes; increased federal funds for medical programs; and use about $677 million in budget reserves or fund transfers.
Washington’s Governor is also hoping Congress will approve the $435 million in Medicaid money from the federal government. However, without the federal money, the state will only have $77 million in the fund for the second year of the biennium forcing Washington to continue its struggle to balance its budget.