Shoppers, get ready for 'Amazon tax' to take effect in California Saturday

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UPS driver Albert Palafox sorts Amazon.com boxes in Palo Alto, Calif., April 2011. (AP Photo/Paul Sakuma)

If you've been shopping around the Web's top retailer for a new TV, jewelry or refrigerator, you might want to know that the price goes up on Saturday.

That's when California's "Amazon tax" kicks in, requiring Internet-only stores to start charging sales tax. Although many online shoppers will barely notice, some heavy Amazon.com shoppers could see their bills climb by hundreds of dollars a year.

"It's almost kind of a panic feeling: Do I need to make some big purchases now?" said Shelly Robinson of Oakdale, a stay-at-home mom "obsessed with Amazon."

This week she helped her mom buy new furniture on the site to beat the tax deadline. "I put the pressure on," Robinson said.

The new law was passed

last year after a bitter battle between Seattle-based Amazon and California leaders. It is designed to give governments around California hundreds of millions of dollars in much-needed new revenue, while leveling the playing field with brick-and-mortar businesses.

Historically, Web-only companies such as Amazon haven't charged sales tax. But companies that sell online and also have a "physical presence" in the state -- such as Apple (AAPL), Target and Sears -- have charged the tax on Web purchases.

Amazon on Wednesday wouldn't say if its sales have gone up in the run-up to the

law taking effect. But Amazon spokesman Scott Stanzel said the company isn't worried about its sales dipping, adding that the company has continued to grow in other states that have passed similar laws "because we offer customers low prices, vast selection and fast delivery."

Take Barb MacNeil, of San Jose, who went to Amazon.com recently to buy a $15 Windbreaker and a $1 iPhone charger, both far cheaper than she could find in stores.

"Even if I had to pay tax, who cares?" MacNeil said. "It's still a win for me."

While most Amazon shoppers said the sales tax wouldn't affect their loyalty to Amazon, some say they might do a little extra shopping around for a bargain.

"It's a pain, but honestly it didn't even occur to me that I wasn't paying tax," said 25-year-old Diego Gonzales, a self-described "Amazonaholic" who works in Oakland.

Added 31-year-old Holly Sickinger, of Redwood City: "They're not going to lose my business. I would just be a very disappointed customer."

The state's tax collectors have ordered compliance from some 200 online-only big businesses -- ones that sell more than $1 million in goods a year in California.

While the biggest, Amazon, has agreed to start charging sales

taxes, others, like Overstock.com, have refused. This month, Overstock cut ties with its advertising affiliates based in California to get around a provision of the new law that only forces companies with California-based affiliates to charge sales taxes.

"We're not going to acquiesce and collect taxes just because the (state) says we should," Overstock.com President Jonathan Johnson told this newspaper.

The sales tax rate you pay will depend on what shipping address you list for the item, though the statewide average is 8.25 percent. It can be as low as 7.25 percent in some parts of California, but in the Bay Area, it ranges from 8.25 percent in most of San Mateo and Contra Costa counties to 9.25 percent in Union City and El Cerrito. Amazon says it won't charge sales tax to someone from California buying an item to ship to states like Oregon that don't have a sales tax.

The state Board of Equalization, which collects California sales taxes, has pointed out that everyone has always been required to add sales taxes to their purchases from Web-only companies. But only 0.42 percent of California income tax filers in 2009 actually did that, led by Santa Clara County, which had a compliance rate of 1.03 percent. The new law requires Web-only stores to add the sales tax before charging customers' credit cards.

Big businesses supported the move in California after passing similar legislation in New York, Illinois and elsewhere en route to ongoing talks over a nationwide law. They say it's a fairness issue.

"People would come into Best Buy and do all their research on their TVs and then go order a big-screen TV off the Internet and save a couple hundred bucks on sales tax," said Bill Dombrowski, CEO of the California Retailers Association.

State officials, meanwhile, were eager to pass the legislation as a means to help cash-strapped governments. Officials expect to collect more than $300 million a year from the sales taxes, with about half of the money going to the state's general fund that pays for things like education and aid to the poor. Local governments also depend heavily on sales taxes to provide services such as police and fire.

"Our choices in trying to avoid sales tax are going to be smaller and smaller," said Assemblywoman Nancy Skinner, D-Berkeley, who authored the bill that created the new law. But "the most important part is our fairness to our California businesses, (and) we will have a little bit more revenue when our schools need every bit we can give them."

Contact Mike Rosenberg at 408-920-5705. Follow him at Twitter.com/rosenberg17.

Source: http://www.siliconvalley.com/ci_21529101/shoppers-get-ready-amazon-tax-take-effect-california?source=rss_viewed

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