News - August 24, 2011

Businesses protest Amazon tax resistance

• Brick-and-mortar retailers call Amazon a 'scofflaw' for trying to repeal an Internet sales-tax bill.

by Sue Dremann

Brick-and-mortar businesses that pay sales taxes are protesting's attempts to get an exemption for Internet sales it conducts in California.

A coalition of small businesses from Menlo Park and Palo Alto held a press conference Wednesday morning, Aug. 17, at Palo Alto Bicycles to address the issue. Participants included Kepler's Books in Menlo Park, Palo Alto Bicycles, Bell's Books, , Chain Reaction Bicycles of Redwood City, wholesalers and the California Teachers Association.

The group is taking part in a statewide campaign by the nonprofit group Stand With Main Street to raise awareness of Amazon's attempt to repeal a state law. California legislators approved the e-fairness bill in June to expand sales-tax collection to more Internet retailers. The state could receive an additional $200 million annually from the sales-tax revenue.

Amazon has spent a reported $3 million for a ballot referendum to try to overturn the law that requires retailers with a physical presence in the state to collect sales tax.

Amazon has fired thousands of California affiliate businesses that sell merchandise through its website because their physical presence would make the online retailer have to pay sales tax under law.

But local business owners said Wednesday that Amazon should pay, given that the state is cash-strapped and an exemption creates an unfair advantage for the Internet giant.

Brick-and-mortar retail businesses already have difficulty competing with large e-tailers that offer products at lower cost, they said. Online-only mega-retailers that exploit the loophole have an advantage of nearly 10 percent, according to the group Stand With Main Street. Brick-and-mortar retail businesses that employ California workers are losing an estimated $4.1 billion annually in sales to online retailers.

That number is expected to rise. Goldman Sachs estimates online shopping will increase from 4.4 percent of all retail sales to 17.1 percent in the near future. Since 2000, online sales have more than tripled.

Clark Kepler, owner of Kepler's Books, said his 56-year-old business nearly closed six years ago because it couldn't compete with Amazon. Kepler's was brought back to life because the community rallied on its behalf.

There needs to be a mind shift if people want local retail to survive, he said. Retail businesses will gain some advantage against online sales "when people start to think of themselves as a resident of a community rather than as a citizen alone.

"We're asking residents not to sign Amazon's petition," he said.

Jeff Selzer, owner of Palo Alto Bicycles, said that, though online retailers can offer discounted products, brick-and-mortar stores provide service and expertise. It's frustrating when customers try out new products and take advantage of the store's expertise, then turn around and buy the product online, he said.

Paying sales tax is also about funding government services, he said.

"The tax is not just good for local businesses but for the entire state," he said.

"We've been doing business in this state for 81 years. Our state is not doing well. It seems to me absolutely ludicrous" for the state to exempt online companies from sales taxes while the tax base for basic services is shrinking, he said.

Faith Bell of Bell's Books said Amazon is disingenuous when the company claims it doesn't have a physical presence in California but its Kindles are produced in San Jose and distributed in the Bay Area.

Bell's has been in downtown Palo Alto for 76 years. Sales tax pays for local road and infrastructure repairs, she said.

"I don't know how much money we've collected that went toward infrastructure in the state and county," she said. "It irks me that others can sell their products without benefiting anybody but themselves," she said.

Don Dawson, a California Teachers Association board member for Silicon Valley, said declining sales-tax revenue has been devastating for schools.

For the past three years, schools have lost $20 billion in funding statewide, affecting class sizes and school programs and shrinking class sections in all grade levels from kindergarten to college, he said.

Mr. Selzer of Palo Alto Bicycles said: "All we're looking for is parity."

Amazon could not be reached for comment, but Paul Misener, Amazon's vice president of public policy, was quoted in the Wall Street Journal as saying: "This is a referendum on jobs and investment in California. ... At a time when businesses are leaving California, it is important to enact policies that attract and encourage business, not drive it away. Amazon looks forward to working again with tens of thousands of small business affiliates in California that were harmed by the new law's effect on hundreds of out-of-state retailers."


Posted by altview, a resident of another community
on Aug 23, 2011 at 12:55 pm

As an alternative to incessant whining, one could choose to take responsibility by electing fiscally responsive government officials, who might in turn:
1) Massively reform California's welfare system,
2) Take on the Union bosses (could be seen as a subset of number 1),
3) Boot the illegals,
4) Make English the default language of government and, in general,
5) Decrease other various and sundry costs of doing business in CA (such as pushing extreme environmental regulations that no other state, let alone country, would adopt, therefore rendering the burdens we impose on our businesses pointless).

If we had been taking these measures, along with others that could be easily enumerated, over the past 40 years, we would be running surpluses, not worrying about driving more businesses out of our state.

Posted by altview, a resident of another community
on Aug 23, 2011 at 1:11 pm

Sorry, that should have read "fiscally responsible." Although "responsive" would be a refreshing change, as well....

Posted by PVResident, a resident of Portola Valley: Central Portola Valley
on Aug 24, 2011 at 11:36 am

Amazon not paying CA sales tax is NOT why CA is having a budget crises and it's not why local businesses are not doing better. Working on Point 5 in the above comment would help. As well, relaxing the absurd parking restrictions in Menlo Park would go a long way for the businesses commenting in the article. I NEVER get a parking ticket when shopping at Amazon.

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