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Amazon pushes California toward referendum on online sales tax

A new California law forces online retailers to collect sales tax for purchases made in the state. Amazon is fighting back by pushing for a statewide referendum on the issue.

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Katherine Braun sorts packages at an Amazon.com fulfillment center, in Goodyear, Ariz, on Nov. 11, 2010. Amazon is fighting a California law that forces it to collect sales tax.

Ross D. Franklin/AP/File

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Amazon.com is preparing to fire back after California passed a law that requires the online retailer to collect sales tax from state residents. And in typical California fashion, they're taking their grievance straight to the people.

The state attorney general's office on July 18 approved Amazon's petition for a statewide referendum on the law. If Amazon can collect 500,000 signatures by Sept. 27, voters will be able to decide next year whether they want to pay sales taxes for online purchases.

California is the seventh state to try to get around a 1992 US Supreme Court ruling holding that sellers can't be forced to collect sales taxes unless they have a physical presence in the state. At stake is desperately needed tax revenue for states that are broke, the competitive advantage of the world’s largest online retailer, and the cost of everything consumers buy online.

California is trying raise an estimated $317 million annually from sales taxes collected by online retailers. A University of Tennessee study says uncollected sales taxes from online sales could be as high as $11.4 billion nationally and $1.9 billion in California.

But Amazon is refusing to cooperate. The California bill was founded in part on the fact that Amazon has thousands of affiliates in the state – small retailers that sell goods under the Amazon banner and get a commission from Amazon for every sale. As a result of the new law, which went into effect July 1, Seattle-based Amazon has severed ties with its California affiliates.

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