An Amazon.com employee at the company’s distribution center in Tracy “picks” orders via a hand-held device. Photographer: Eric Slomanson Amazon.com
An Amazon.com employee at the company’s distribution center in Tracy “picks” orders via a hand-held device. Photographer: Eric Slomanson Amazon.com

Business & Real Estate

Compromise of 2011 has benefited Amazon, California

By Mark Glover

mglover@sacbee.com

August 20, 2015 03:36 PM

UPDATED August 22, 2015 07:01 PM

Five years ago this summer, the relationship between Seattle-based Amazon.com Inc. and the state of California was adversarial at best, or downright toxic at worst.

Back in 2011, Gov. Jerry Brown had signed a law forcing the Internet giant and other e-retailers to collect sales tax from California customers, a move that pleased brick-and-mortar retailers who loudly charged that online firms, Amazon primary among them, had long had an unfair pricing advantage through what they characterized as a tax dodge.

Amazon responded by devoting $5.25 million to collect signatures for a 2012 referendum that would have asked voters to overturn California’s online sales tax law. The company also fired 10,000 affiliated businesses and nonprofits that funneled customers to the retailer.

And then, in September 2011, the rancor vaporized as lawmakers and Amazon struck a compromise.

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Brown subsequently signed a law suspending the sales tax collection until September 2012, Amazon suspended its ballot fight and put out the welcome mat for the previously jettisoned in-state sales reps. Amazon also vowed to bring 10,000 jobs to California.

Since then, media coverage has waned – not necessarily a surprise, given the headline-grabbing nature of a government-vs.-corporate giant scrap. But undeniably, the negotiated peace of 2011 has produced significant results five years later.

Brown spokesman Evan Westrup noted that the “compromise put an end to what would have been a long, costly fight, and instead paved the way for thousands of new jobs, millions of dollars in new revenue and five new fulfillment centers from Tracy to Moreno Valley.”

“I can now confirm that we have over 10,000 jobs in California,” Ashley Robinson, a spokeswoman for Amazon’s Western operations, said this month in an interview at The Sacramento Bee.

Most of those jobs fall within the five “fulfillment centers” built in Tracy, Patterson, Redlands, San Bernardino and Moreno Valley, accounting for more than 5 million square feet of space combined.

Amazon’s website lists hourly pay of $13.50 for a “fulfillment associate.” The company says new hires are immediately eligible for health insurance, a 401(k) program, company stock and other incentives.

For Amazon, the warehouse/distribution centers enable it to make faster deliveries and process merchandise orders in the massive California retail marketplace.

The centers have “allowed us to meet customer demand,” Robinson said. “California is such a huge state and has a huge customer base.”

The fulfillment centers have also given Amazon an opportunity to showcase robotic technology.

At its sprawling, 1.1 million-square-foot fulfillment center in Tracy, squat, orange Kiva robots scuttle around the warehouse, moving merchandise and filling customer orders. Amazon bought Kiva Systems for $775 million in March 2012; the retailer has more than 15,000 Kiva robots operating nationwide.

Amazon’s center in Patterson includes Robo-Stow, a huge robotic arm that can move pallets and large quantities of inventory. California Amazon employees also use high-end computer systems to fill customer orders.

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California gets a big tax boost, 10,000 jobs and sizable infrastructure from a huge corporation … and Amazon has set up shop in the most populous state in the union. I’m sure there are critics, but that’s what I’d call a win-win.

Peter Schaub, marketing and branding expert

For its part, the state of California has literally cashed in on the September 2011 deal.

Brown’s signature on the compromise measure – Assembly Bill 155, authored by Charles Calderon, D-Whittier – delayed online sales tax collection in California until Sept. 15, 2012. Citing taxpayer confidentiality laws, the state Board of Equalization said it does not break out numbers for Amazon, but a look at BOE’s quarterly listings of AB 155 sales tax revenue shows the dramatic effect of online retailers entering the mix.

In the third quarter of 2012, just before the collection requirement commenced, AB 155-related tax revenue totaled $11.9 million. In the fourth quarter of 2012, it spiked to $96.4 million. In the fourth quarters of 2013 and 2014, sales tax revenue totaled $123 million and $148 million, respectively. Historically, fourth-quarter numbers are highest due to the large volume of online shopping during the holiday season.

In this year’s first quarter, BOE said AB 155-related sales tax revenue totaled $118 million, the highest collection reported outside a fourth quarter.

Peter Schaub, a marketing and branding expert based in faraway New York, distinctly remembers the compromise of 2011 “because for people like myself, sitting 3,000 miles away, that deal they struck was a game-changer … California had a reputation as a job-killer state, and it looked like Amazon and California were going to come to blows, and then a compromise. That’s not what I thought would happen.

And now, Schaub added, “California gets a big tax boost, 10,000 jobs and sizable infrastructure from a huge corporation … and Amazon has set up shop in the most populous state in the union. I’m sure there are critics, but that’s what I’d call a win-win.”