In 1992, the Supreme Court of the United States handed down a landmark ruling that has since protected Amazon.com and other online marketplaces from requiring their buyers to pay sales tax. Following the heated business litigation, the court ruled that out-of-state companies were exempt from collecting sales taxes if they had no presence in the state of purchase. Therefore, as long as companies like Amazon don't have any employees, stores or warehouses in a state, they are not required to collect sales taxes on purchases made in that state.

As Amazon grew more popular, to the point that it began putting brick-and-mortar retailers such as Borders out of business, states began to figure out ways around the Supreme Court ruling. Now, a new California law that will require Amazon to collect sales tax from customers in the state has sparked a political movement, with Amazon at the helm.

The California law states that Amazon does not qualify for the sales tax exemption because the company has advertising affiliates and related operations in the state, and, therefore, that it has a presence in California. Amazon disagrees, and is refusing to comply. Instead, it is seeking to overturn the law by placing a statewide referendum on the ballet next year.

In order to get its measure up for a vote, Amazon needs to obtain more than 500,000 signatures from California citizens. To accomplish this, the company has hired National Petition Management, a signature-gathering firm whose employees are independent contractors paid by the signature. In a move that has rubbed salt in the wounds of California businesses that have always had to charge sales tax, the Amazon petitioners are congregating outside busy California shopping districts, informing consumers of the law and asking for signatures.

Clearly, this fight is far from over. We will continue to update our business litigation blog with any new developments.

Source: Los Angeles Times, "Amazon gathering anti-tax-law signatures outside retail stores," Andrea Chang and Marc Lifsher, August 6, 2011