Amazon versus Big Box Stores: Get Ready to Rumble

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Californians may be on the verge of seeing an unusual battle between two great economic forces in the June 2012 election.

In the wake of the legislature's new law requiring e-tailers to collect sales taxes, Amazon has struck back by launching a referendum campaign to repeal the policy. Otherwise, the company could be on the hook for several hundred million dollars annually through forced sales tax collection from California buyers.

That a major company would challenge a law via the proposition process is not news in itself. California has a colorful history of businesses spending big bucks to promote or oppose policies through the ballot box. In recent years, oil, tobacco, Indian gaming, insurance, and electricity companies have all weighed in, being none to subtle with their hefty financial contributions.

The upcoming fight will be particularly interesting because of the many players stacked against Amazon. Not only will small businesses be frothing at the electoral mouth to take on a behemoth that has threatened their wellbeing, but they will be joined by huge companies such as Walmart, Barnes & Noble, and perhaps Kohl's, Target and others who also sense that the playing field is anything but level. They have a point in that while they must collect sales tax because of their presence in California, Amazon does not. That alone gives an advantage to Amazon, which did $34 billion worth of tax-free business in 2010.

Amazon will promote the referendum as an effort to save jobs with California suppliers that it has been forced to jettison because of the new law. But the opposition will have grounds for arguing about all of the jobs they've already lost because of Amazon's gains in what can be termed as a zero-sum business environment. Border's Books stands out as the latest casualty.

If this were merely a fight between a huge economic power and the state, Amazon might well prevail. But with the other side composed of players as big or bigger than Amazon, this time the venerable e-tailer may be biting off more than it can chew.

As the venerable L.A. Dodgers announcer Vin Scully says before the first pitch of every game, "pull up a chair. We're in for a dandy."

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