Earlier today, California governor Jerry Brown put his signature on the Internet sales tax bill at the Gap Inc. offices in San Francisco. However, this doesn’t mean that California will see an increase at the online checkout screen just yet. Governor Jerry Brown compromised with the leader in opposition, Amazon, and postponed collection of the sales tax until September 12, 2012. In return, Amazon agrees to end a political push to promote a ballot referendum designed to overturn the law. This move is designed for Amazon to petition political representatives in Washington D.C. and attempt to create a bill for a national sales tax on all online purchases.
The original bill required online retailers to collect sales tax from customers starting on July 1 if they had business operations in the state. Prior to the cutoff date, Amazon cut off all business relationships with approximately 25,000 affiliates around the state. Any online business earning money on the sale of items through Amazon was forced to relocate out of the state or find other ways to bring in revenue. While Amazon is likely to work out a new deal with the California-based affiliates in the interim, the company may shift to pay-per-click relationships rather than the previous affiliate relationships.
Amazon does plan to create 10,000 full-time jobs and at least 25,000 seasonal job within the state by 2015. In addition, the company plans to invest over $500 million in distribution centers within the state as well. Traditional retailers with physical storefronts are satisfied with the current compromise as companies like Wal-Mart and Target are definitely interested in seeing a national sales tax level the playing field. Other states will likely watch the development of a national online sales tax as they mull over the potential of increased revenue from taxing online purchases. However, the current compromise to the bill will cost California $200 million in potential tax revenue this fiscal year.