Political Fallout from the Amazon Tax Referendum

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

A potential
split within the business community over Amazon.com’s referendum on a new sales
tax law could have larger repercussions for business entering an unpredictable
election year. The referendum, should it qualify, would likely be on the June
primary ballot, which will be the first, full-blown test for the top two
primary system. The tax issue and the primary candidates make an unstable
mixture.

Amazon.com filed a referendum to overturn the newly signed law requiring that
online sellers collect sales tax on products sold to Californians. Should the
referendum qualify for the ballot, it will set up a business versus business
campaign battle, with state retailers who must collect sales taxes versus out
of state online sellers who do not collect sales taxes and their California
affiliates. The split in the business community could affect candidate races
during the 2012 primary election.

The California Retailers Association supported the law requiring that taxes be
paid on online sales, as they put it, to level the playing field. Sales taxes are
added to the cost of their products making similar products purchased online
that much less expensive. The sales tax could increase the total cost of an
item up to 10% in some jurisdictions.

Meanwhile, Board of Equalization member George Runner, who campaigned against
the new law, issued a release pointing out that Amazon and at least three dozen
out-of-state online sellers have severed ties with thousands of California-based
affiliate businesses so that the online sellers could continue selling in
California without collecting sales taxes. Runner said the affiliates would
lose jobs or go out of business, meaning the state would not collect the
revenue it expected from the law.

If the Amazon supporters succeed in securing nearly 505,000 signatures in 90
days, the tax law will be suspended and the referendum will appear on the June
ballot. (Assuming that the bill to push the currently scheduled presidential
primary in February is pushed back to June, which is a good bet.)

The referendum could become a litmus test for candidates battling it out in the
primary that will move the top two finishers on to the general election
regardless of party. It also could complicate matters for candidates of both
major political parties who seek business support for their candidacies.

Public sector unions have already declared they will play in the Republican
leaning districts to help choose a moderate Republican.  The referendum
could become the key issue for candidates seeking their support. Beyond that,
the referendum would be a test for those candidates who decide whether to take
the no-tax pledge that comes along every election season.

 

While some might
argue that supporting the new law is not a tax increase but rather extending
the current sales tax provisions to businesses that should be collecting but are
not, that argument is unlikely to fly with anti-tax advocates.

If candidates take the pledge and oppose the new law they might lose support
from some neighborhood businesses and large chain stores that support the new
law. Some candidates could possibly build support with those businesses that
the candidate might maintain through the general election because of their position
on the referendum. This could benefit some Democratic candidates who desire
business backing.

 

In the end,
candidates could have both business support and business opposition from the
businesses passionately concerned with this issue, thus muting the
business-support message a candidate wants to deliver. This referendum could
present candidates in the June primary with an obstacle course to navigate if
the referendum qualifies for the same ballot.

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