Amazon seeks to overturn new online sales tax law

Amazon.com has launched an effort to overturn California’s new online sales tax law, asking voters through a statewide ballot referendum to throw out the law that the governor and lawmakers said would bring in hundreds of millions of dollars annually to the strapped state.

Amazon submitted the referendum papers to the state attorney general’s office, which provides a title and summary of the proposed measure, the first step in a lengthy process to place the measure on the ballot. If ultimately approved by state officials, Amazon could begin collecting the 504,760 sginatures necessary to qualify the measure for the next statewide election in 2012, currently set for February although it likely will be pushed back to June.

The qualification campaign alone could cost $1 million to $1.5 million.

The use of the referendum is not unprecedented but it is used sparingly. Perhaps the best known example of a referendum was in 1982 when California voters overturned the law that authorized development of the Peripheral Canal, which was intended to take surplus north state water to southern California. That law, like the new sales tax statute, was signed by Gov. Jerry Brown.

The dispute over online sales tax collections has been intense in recent years as the state’s economy has weakened and lawmakers grappled with muiltibillion-dollar deficits.

Under the new law, Amazon or any other online retailer with affiliates in California — including online-only affiliates and referral operations — must collect sales taxes on California transactions and remit the money to the state. Previously, the online sellers were required to collect the tax only if they had physical facilities in the state, so-called bricks-and-mortar operations.

Amazon does not have physical facilities in California and thus far has not been required to collect sales taxes. As the new law took hold, the company severed its relationship with thousands of online affiliates in the state and denounced the new statute as unconstitutional. The law, which is expected to bring in $300 million annually to the state, is all but certain to be challenged in the courts.

California retailers small and large  — including Wal-Mart, Home Depot, Target and others — say Amazon has enjoyed a competitive advantage in the state by not being required to collect the 7.25 percent base levy.