Menlo Park Store Owners Side With State in Amazon Tax Debate

Menlo Park merchants are siding with California lawmakers in a battle against the online sales giant Amazon.com over sales tax revenue.

The Seattle-based online retailer is circulating a petition to California voters in an effort to collect enough signatures to float a ballot measure in the November election that, if passed, would continue Amazon's exemption from collecting sales tax on online sales in the state.

The petition was born after California Gov. Jerry Brown signed into law a budget bill that required companies with a physical presence in the state to collect sales tax from its customers. This makes it possible for the state to increase its sales tax revenue and shrink the multibillion-dollar gap between its expenditures and revenue.

Amazon has vehemently opposed Brown's effort since it would be forced to collect taxes from customers in California for the first time. The company is said to have a presence in the state since it has warehouses within California borders.

Amazon, widely considered the Internet's largest purveyor of household goods, wants residents to sign its petition supporting the ballot measure to continue its exemption from online sales tax collection. And at least one local merchant is telling those in his community to pass on signing the petition.

Clark Kepler, CEO of Kepler's Books in Menlo Park, said the new law should remain in place as it will foster competition between local retailers and their online counterparts while generating more revenue for the state.

"It is a matter of fairness," said Kepler. "It's about giving all players in all industries a level playing field."

Kepler and his fellow merchants in the Hometown Peninsula association of businesses are urging people to stand in solidarity with local business by not supporting Amazon's referendum effort. Hometown Peninsula is a collective of more than 100 locally-owned and operated businesses in the Bay Area that encourages residents to shop in or near the neighborhoods where they live.

Amazon and other online retailers with a state presence have enjoyed an exemption from collecting taxes in California for too long, said Kepler, and now it's time to hold Internet companies to the same requirements faced by local businesses.

And as battle lines are being drawn in the fight, unusual alliances have formed.

Wal-Mart has sided with the state government and local retailers to force Amazon to collect sales tax from its customers, said Kepler. The big-box store, which is also forced to collect state sales taxes, has long been the target of local merchants who claim they cannot compete with the prices and selection offered by Wal-Mart.

But the company, referred at times by local business owners as a "community killer," has now become a powerful lobbying partner against a mutual enemy.

"Politics makes strange bedfellows," said Kepler of the temporary cease-fire with Wal-Mart.

"Despite our complete philosophical difference, the principle of fairness is the same for independent business and for Wal-Mart," he said. "All California-based brick and mortar businesses are fighting unfairly with Amazon."

Amazon, along with Overstock.com, has cut ties with affiliates having a presence in California. The company said the state's effort to improve its economy by taxing online retailers will backfire, because more sites will close warehouses in California resulting in widespread job losses.

But Kepler said Amazon is overstating its ability to generate local revenue, and claims nearly 60 percent of every dollar spent at a local, independent business stays in the regional economy. That's about 20 percent more than the money coming from Amazon.

Kepler said Menlo Park residents and shoppers have shown significant support for him and his business since the fight began.

But not everyone sympathizes with the struggle of independent businesses on the Peninsula. Ray Darwin, a Los Altos resident and dedicated Amazon patron, said he is not thrilled about the prospective of being taxed when he buys goods online.

"I don't understand why the onus of balancing the state budget has to come out of my pockets," he said.

Darwin said he believes lawmakers should have continued to cut social services rather than look to tax revenue to close the remaining budget gap.

Kepler simply disagrees.

"With the economy in the sad state it's in, there is a sense of 'enough is enough,'" he said. "We've birthed the Internet. We've given those businesses this unfair advantage. Now maybe it is fair to make some changes in order to get some in return."

Editors note: July 25, 10 a.m.  A phrase in this story previously implied that Amazon owns Overstock.com. Roger Johnson, Overstock.com Spokesperson, said via email that Amazon does not own Overstock.com, which is also known as O.co. The altered phrase is indiated with italics.