Some California cities are calling on the state to re-approve a fairer way to share tax revenues generated by Amazon’s online sales-warning that changes made earlier this year created an unfairness in multi-million dollar payments. The “winners and losers” system is used for critical public services.
The stakes are high: Amazon is larger in California than any other state, with 60 fulfillment and sorting centers, 50 distribution stations, and 153,000 employees.That is based on Its official statistics are as of the end of 2020. Given the rapid expansion of Amazon’s fulfillment and delivery network, the numbers are now even higher.
In theory, California’s cities should benefit from this growth. Since 2012, Amazon has been collecting sales tax from online shopping in California.
Until this year, taxes were paid to the local municipality where the product was delivered based on the customer’s location. But starting earlier this year, this practice has changed, and the tax revenue is given to the municipal government of the place of shipment, which is the location of the Amazon fulfillment center.
City officials from across the state will consider this issue at the upcoming California City League Annual Meeting. A proposal submitted to the organization by the city of Rancho Cucamonga in California would call for the state to implement a “fair and equitable distribution” of the 1% sales tax on online shopping in the state.
A Rancho Cucamonga report wrote: “This change has caused most California cities-in fact more than 90%-to experience sales tax revenue losses starting in the fourth quarter of calendar year 2021.” The organization Known as Cal Cities.
The report added: “Many cities may not be aware of this impact because sales tax fluctuations after the pandemic closed have masked the problem. But this change will have a long-term impact on the incomes of all California cities because all of this The income from the city has been transferred to the few cities and counties that have the retailer’s fulfillment centers.”
The proposal attributed this change to the change of the ownership structure of the Amazon logistics center from a third-party supplier to the company itself, which changed the way California’s tax policy treats its sales.
According to Rancho Cucamonga’s proposal, this resulted in Amazon’s sales tax revenue “fully allocated to the specific city where the warehouse fulfillment center is located, rather than entering the county-wide shared with all jurisdictions.”
Amazon disputed this interpretation and stated that it only follows the guidance of the California Tax and Expenses Administration (CDTFA), which determines how sales tax revenue from Amazon online purchases should be earned in the state.
An Amazon spokesperson said in a statement to GeekWire this week: “As a company doing business in California, we are obligated to follow the tax guidelines set by the state and adjust our tax collection procedures to ensure that we comply. Legal.”. “We are committed to investing in the communities in which we operate and helping the local economy grow.”
Since Proposition 13 from 1978 imposed restrictions on property taxes, California cities relied heavily on sales tax as a source of income.
Changes in the distribution of Amazon’s sales tax revenue “have created huge inequality between cities, especially for those cities that have been built, have no space to house 1 million square feet of logistics centers, and are not along the main tourist corridors, otherwise they are not suitable for hosting fulfillment centers. ,” the Cucamonga Ranch proposal said.
It added: “These policies are particularly beneficial to retailers, who may use current policies to negotiate favorable sales tax sharing agreements to provide retailers with more funds at the expense of funds for key public services.”
The proposal acknowledges that “cities that have operating centers are affected by these activities and should receive fair supplementary compensation,” but added that “the neighboring cities where residents order products from the center are now not getting income from the center’s sales activities, although They have also experienced the impact of the center, such as increased traffic and air pollution.”
Rancho Cucamonga’s proposal was initially approved by cities including Placentia, Sacramento, Moore Park, Lakewood, LaVine, and El Cerrito. Leaders of several other cities in the state have since stated that they Will support the proposal.
It will be reviewed at the California City Conference in Sacramento from September 22 to 24.