California Governor Signs Amended Sales Tax Fairness Bill

On Friday, September 23, Gov. Jerry Brown signed an amended sales tax fairness bill that was the result of a last-minute deal California lawmakers made with Amazon.com. The amended law provides Amazon.com with a one-year sales tax exemption while increasing the minimum small business exemption from $500,000 in annual sales to $1 million. Under the new law, Amazon.com must begin collecting and remitting sales tax to the state beginning September 15, 2012, unless federal sales tax fairness legislation is passed before then.

“A prolonged, costly ballot battle is a benefit to no one,” Gov. Brown said. “This landmark legislation not only levels the playing field between online retailers and California’s brick-and-mortar businesses, it will also create tens of thousands of jobs and inject hundreds of millions of dollars back into critical services like education and public safety in future years. It’s time for Washington to follow our lead and forge a bipartisan national solution.”

Before the California legislature voted on the bill, Amazon agreed that in return for the one-year moratorium it would drop its efforts to overturn the state’s sales tax equity legislation via a referendum vote. The California legislature passed the amended law, which has an “urgency clause,” by two-thirds vote, meaning the bill cannot be overturned via referendum vote.

Under conditions of the deal, if Amazon.com opens a distribution facility in California between now and September 2012, it would trigger nexus and the online retailer would be required to collect and remit sales tax to the state.