E-Fairness: Closing the loophole that favors Amazon, Overstock

As the president of the California Retailers Association, I represent businesses with more than 9,000 stores throughout California.  And these stores provide thousands of jobs, billions in revenue and countless products for the people of California.  As a result, one of our association’s top priorities is ensuring that these stores are competing on a level playing field.

That’s why we support e-fairness legislation, such as AB 153.  Right now, retail businesses that have e-commerce sites are required to collect sales taxes.  So if any one of our stores also sells its products at a physical store or online, it must also collect sales taxes even from online purchases.

But online-only retail companies like Amazon and Overstock don’t play by these rules.  A loophole in the law has helped them avoid collecting and remitting these taxes.  This has allowed them to essentially offer customers falsely cheaper product.  This gives them an unfair and artificial competitive advantage of nearly 10 percent over other retailers who operate e-commerce sites in addition to their brick-and-mortar stores.

That’s the problem e-fairness legislation corrects: it requires every store to collect the taxes owed at the point of purchase whether the store is located in California or online in some other place.  In response to the efforts to create fairness, Amazon has made a number of ridiculous claims.  Amazon is entitled to its own opinion, but not its own facts.  Here is the reality:

First, Amazon has threatened to leave the state if the playing field is leveled.  But the track record indicates that won’t be the case.  California is the biggest market in the country and one of the biggest markets in the world.  Amazon can’t afford to not be in California. When Amazon faced a similar choice in New York, it decided to stay and collect the sales tax.  Amazon will do the same in California.

Second, Amazon claims that terminating its relationships with affiliates in California will cost the state jobs.  Actually, e-fairness legislation like AB 153 will save and create jobs.  Under the status quo, thousands of jobs are lost in this state due to online sales with out-of-state vendors who enjoy an advantage that is unfair.  By creating a level playing field, those sales will be conducted in California and therefore create more jobs and more economic growth, not to mention save retail jobs that are being threatened or currently lost.
Furthermore, the reality is that major retailers operating in this state have relationships with thousands of California affiliates.  If Amazon actually does sever its relationships with California affiliates, companies like Barnes & Noble have already invited the Amazon affiliates to start working with them instead.

Third, Amazon argues that we should wait for national legislation on this issue.  But in reality, this is a state concern.  We are the ones suffering because of this loophole.  For the benefit of our state and our economy, we need to act now.

Next, Amazon suggests that the status quo does not harm the economy.  The facts tell a different story.   California is losing thousands of jobs and billions of dollars in economic activity.  In 2010 alone, California lost over 18,000 jobs and retail businesses lost $4.1 billion in sales and that created a loss of $7.2 billion in economic activity as a result of the state’s outdated e-commerce laws.

Finally, Amazon wants people to believe that e-fairness represents a new tax.  Far from it.  What e-fairness represents is the closing of a loophole and the equal enforcement of the law meaning every retailer collects the sales tax, not just California businesses.   Purchases made over the Internet are not tax free. When Amazon doesn’t collect the tax on an online sale, the tax is still owed.  The burden then falls to consumers to track and remit that tax when filing their personal, state income tax.  So what Amazon is truly arguing for is that their consumers should have to collect receipts and add up purchases to compute additional sales tax liability every year or be in violation of the law.  Simply put, Amazon would rather put the burden on its consumers rather than take responsibility themselves, which brick-and-mortar stores do every day by collecting at the storefront and online.

At the California Retailers Association, we welcome the role of online vendors in our state.  But we insist that everyone must play by the same set of rules.  Amazon and Overstock are no different than any other retailer.  And they should not be allowed to skirt the rules and hurt California employers.  A sale is a sale is a sale regardless of where it takes place.
For California to prosper and for our economy to grow, we must promote e-fairness.  All retailers can and must compete by the same set of rules or we will lose more jobs and revenue in California.