Amazon and California lawmakers cut sales tax deal

The online retail giant agrees to call off its referendum to repeal a new law in exchange for a one-year grace period from having to collect state sales taxes.

Jay Greene Former Staff Writer
Jay Greene, a CNET senior writer, works from Seattle and focuses on investigations and analysis. He's a former Seattle bureau chief for BusinessWeek and author of the book "Design Is How It Works: How the Smartest Companies Turn Products into Icons" (Penguin/Portfolio).
Jay Greene

Amazon has cut a deal with California lawmakers, according to various reports, giving it another year to sell products to that state's residents tax free.

In exchange, Amazon agreed to halt efforts to overturn the new California law requiring it--and other out-of-state online retailers--to collect sales taxes, according to a Los Angeles Times report. That law, signed in June, requires any retailer who, "through a subsidiary," has any "place of business" in California to collect sales taxes.

Amazon is clearly betting that federal lawmakers will take on the issue before California can start collecting the taxes. There's no guarantee that Congress will act. But if it does, its law would take precedent over the California one.

California lawmakers seemed to have blinked, in part because they couldn't drum up enough votes to immediately compel Amazon to collect taxes, according to The New York Times. That inability to press for tougher measures against Amazon led lawmakers to deal.

While the company and lawmakers reached their "handshake" deal last night, according to reports, they still need to hammer out the details of the final agreement.

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