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California, Texas: A tale of two online sales tax approaches

The battle by states to collect sales tax money from online retailers continues to be fought on various fronts with varying degrees of success.

Man shopping online The tax collection proposals would apply to all online sellers, but they're known as Amazon taxes because the giant bookseller-turned-general-electronic-retailer is leading the charge against the taxes.

In California, a bill incorporating portions of three earlier measures designed to make out-of-state online retailers to pay sales tax on goods sold in the Golden State late last week made it to Gov. Jerry Brown's desk.

There is similar legislation on the books or in the legislative pipeline in more than a dozen other states. But if Brown signs the California measure into law, it would be the biggest victory yet for proponents of e-commerce sales taxes.

Supporters say the bill would bring California $200 million or more per year, $83 million from Amazon alone. But it's unclear whether Brown will sign it.

Amazon threats, rewards: Amazon's reaction to all the bill has been the same. The Seattle-based company Amazon threatens to end affiliations with businesses in states that pass such legislation.

It also is using the prospect of new facilities, and jobs, in states as both a carrot and stick.

When South Carolina considered taxing online sales, Amazon said it was canceling plans to build a distribution center in the state. Palmetto State lawmakers relented. Amazon gets a tax exemption and the state got some jobs.

The same thing is going on here in Texas. The Texas Comptroller filed a lawsuit against Amazon seeking taxes she says the company owes the state.

The Lone Star State legislature, looking for ways to avoid tapping the states rainy day fund, followed up with an online sales tax collection bill. Gov. Rick Perry, a potential no-taxes-at-all Republican presidential candidate, promptly vetoed the bill.

Being stubborn Texans, lawmakers resubmitted the online tax proposal as part of the state's budget bill.

Deals for everyone! Now, however, it looks like a South Carolina style deal might be in the works in the Austin state house.

Amazon is negotiating a deal, reports the Austin American-Statesman, that would create more than 5,000 jobs and $300 million in capital investments in Texas over the next three years in exchange for a four-and-a-half year exemption from online sales tax collection.

As a Texan, I am not thrilled with this deal. Yes, the state will get new investment and, I hope, some property tax payments from Amazon. But there's lots of data indicating that tax breaks targeted to specific companies are not good for a state's overall, long-term health.

Plus, unlike South Carolina which will get some income tax income from the new Amazon employees in that state, the new Texas workers won't be paying income taxes.

I also find it interesting in both the South Carolina and Texas deals, Amazon seems to be playing for time.

In each case, the company gets just temporary tax exemptions. Was that the best it could do, or does Amazon realize that eventually it will end up paying so it's just trying to delay the cost as long as possible?

Battle of the big businesses: Despite Amazon's current power position, big box retailers, which each day lose more sales to online retailers, are increasing their lobbying to, in their words, level the sales tax playing field.

Among members of the e-tax group Alliance for Main Street Fairness, which in its communications frequently cites damages small businesses face when online sales taxes are not paid, are major national retailers such as Best Buy, Home Depot and Sears. These aren't the mom and pop stores the organization's name conjures up, are they?

So the online sales tax war, as is the case in most tax and policy confrontations, is really between the big boys.

And the side that spends the most on lobbying and political action committee contributions (rather than on paying taxes) will be the ones who end up happier with the eventual outcome.

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