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A controversial bill that aimed to redistribute e-commerce tax revenue away from localities with large warehouse presences was narrowly defeated in the California State Assembly on Tuesday, marking a victory for Amazon and a coalition of cities and counties that had strongly opposed the legislation.
The bill, AB 1405, proposed diverting a portion of sales tax money generated by online purchases away from the cities and counties where e-commerce warehouses are located. Instead, that tax revenue would be redistributed to all municipalities based on population. Proponents argued this would create a fairer system, preventing “winners and losers” based on where warehouses happened to be built. However, critics lambasted the bill as an attack on the economic development plans of logistics hubs like the Inland Empire.
After months of intense lobbying on both sides, the bill failed to garner enough votes for passage in the Assembly by a razor-thin margin of 37-35 [1]. The defeat preserves the existing tax structure that allows cities and counties to keep the local e-commerce taxes generated within their jurisdictions.
“This was an ill-conceived bill that would have severely undermined the Inland Empire’s economy and ability to fund critical public services,”
said Xavier Becerra, Mayor of Ontario.
We’re relieved the Assembly rejected this brazen attempt to raid our tax revenues. [2]
Amazon was one of the most vocal opponents of AB 1405, arguing it would disrupt their operating model and investments in the state.
In a statement, the company said:
We’re gratified the legislature ultimately listened to the voices of workers, businesses, and communities that overwhelmingly opposed this legislation. Amazon’s presence brings jobs, infrastructure investments, and tax revenues to support local services and amenities. [3]
Supporters of the bill had sought to frame it as a matter of tax fairness, noting the concentration of e-commerce facilities in a few regions created disadvantages for other municipalities. But critics charged it would effectively punish cities for attracting economic development and incentivize warehouses to locate outside of California.
The bill’s failure marks the second consecutive year such redistribution efforts have stalled in the state legislature. A similar proposal never made it to a vote last year amid intense opposition.
Looking ahead, both sides have signaled the tax issue is far from settled. Bill author Assembly member Luz Rivas (D-Alhambra) said she remains committed to
updating our outdated tax laws to account for the dominance of e-commerce.
Conversely, the California Tax Equity Coalition, which includes Amazon and local government groups, vowed to
remain vigilant against any future attempts to raid cities and counties of their tax revenues. [4]
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