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Amazon Cuts Tax Deal With California

8 Sep, 2011 By: Erik Gruenwedel

Tentative agreement allows ecommerce behemoth to delay collecting sales tax on purchases such as DVDs, Blu-ray Discs, HDTVs and Blu-ray players in the state for another year

Amazon.com has made a deal with California lawmakers that allows it to avoid collecting sales taxes on purchases made in the state until September 2012.

The ecommerce giant will drop its state ballot initiative that would have allowed California voters to determine whether Internet companies in and out of the state must charge sales tax for in-state purchases.

The deal — struck late Sept. 7 — lets Amazon avoid having to retroactively pay sales taxes on purchases in the state since July. Amazon had refused to do so and severed ties with more than 10,000 affiliates in the state in June in protest. It also launched a $5 million signature initiative aimed at putting the measure on the 2012 ballot.

The contentious issue about whether Internet companies must collect sales tax is set to be debated by Congress by next summer.

“It’s a safe harbor for up to a year,” Assemblyman Charles Calderon, D-Whittier, told the Los Angeles Times.

Amazon recently offered to hire 7,000 workers in the state if California opted not to mandate collection of sales taxes until 2014 — a requirement every other business in the state must abide to. That offer was rejected by Gov. Jerry Brown. It wasn’t immediately known if he would support the current deal.

Lawmakers say collecting sales taxes from Internet companies doing business in the state would generate about $200 million annually — funds they say are needed to meet the state’s $86 billion budget.

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