Your Turn: Must close online loophole

As pointed out by the Times, the real issue surrounding a currenttax loophole affecting California small businesses and the state'sbottom line is fairness.

While it certainly makes sense to allow a collection exemptionfor true small business, online startups, any argument that Internetbusinesses needed a tax break are long outdated. No one can arguewith a straight face that asking Amazon to start collecting thesales tax poses an undue burden.

And yet, large Internet-only companies like Amazon are takingadvantage of an outdated loophole that is costing Californiathousands of jobs and billions in sales tax revenue.

California is currently facing a $26 billion budget shortfall andmore than 12 percent unemployment. By passing AB153 (Skinner) theLegislature has an opportunity to bring back billions of dollars inlost revenue and more than 18,000 jobs that are currently being lostas a result of out-of-state, online sales.

Although the Times was accurate in its evaluation of the fairnessissues presented by the existing tax loophole, it was not correct inits evaluation of Amazon's threats to California affiliates.

Amazon has made similar threats before, and their track record ismixed. In New York -- a market that is relatively close in size toCalifornia -- Amazon kept its relationships, presumably because theycannot afford to lose ground with such a large consumer base atstake. And, in actuality, Amazon did not pull affiliates from Texas.Instead, Amazon closed a distribution center after refusing to pay$269 million in taxes owed to the state.

That is why we believe Amazon will keep its relationships inCalifornia, because like New York, it can't afford to give up apiece of the largest consumer market in the country.

However, regardless of the outcome, we cannot let companies likeAmazon put a gun to the state's head demanding special treatment.Many of Amazon's brick-and-mortar competitors have onlinerelationships with California affiliates, and they will undoubtedlyexpand that presence if Amazon makes the mistake of creating avacuum.

Specifically, Walmart, Barnes & Noble, Best Buy, Target and Searshave all agreed to let any California affiliates who have beendropped by Amazon join existing affiliate programs.

At the end of the day, Amazon and other large, out-of-state,online-only retailers should choose to compete for market share inCalifornia under the same rules as everyone else -- but they'll onlyget to that point if we take action and close this loophole.

We cannot sit back and wait for the federal government to make e-fairness a priority. The uneven playing field created by thisloophole is costing California thousands of jobs and millions insales tax revenue. We shouldn't be forced to ask the voters to raisetaxes until we've made sure that sales tax dollars that are alreadyowed are adequately collected. This is about fairness and commonsense.

Scott Hauge is president of Small Business California.