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Amazon Tax Referendum Advances in California

1 min readBy: Richard Morrison

California Attorney General Kamala Harris has opened the way for a possible repeal of the state’s recently adopted “Amazon taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. ” law, which requires out of state retailers like to collect sales and use taxes on purchases by in-state residents. Harris has approved official language for a proposed initiative, which clears the way for proponents to beigin collecting signatures to qualify for the ballot.

The retailer and its online allies will have until Sept. 27 to gather 505,000 signatures to qualify the referendum for the ballot. Should it qualify, the state would have to suspend its new sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. law until voters decide on the matter next June.

The law, Assembly Bill X1 28, was approved by Democratic lawmakers and signed by Gov. Jerry Brown last month. It expands the definition of retailers required to collect sales and use tax on California purchases, and the budget relies on the measure to raise $200 million this fiscal year.

Those revenue projections may prove to be unduly optimistic, as similar laws in other states have a poor record of raising money. That flaw, and many others, are highlighted in a recent Fiscal Fact by Tax Foundation Vice President for Legal & State Projects Joseph Henchman.

Read more on the limits of state taxing authority (including nexus, the streamlined sales tax project, and Amazon taxes) here.