Amazon is now collecting California sales tax

In cash-strapped California, sales tax on Amazon orders is expected to bring in $83 million in the next year.
CBS News

(CBS News) LOS ANGELES - Attention California shoppers: Starting Saturday, a new law requires online retailers to collect local and state sales taxes. The move to help California's bottom line is also changing the business plan for Internet giant

BJ Gallagher has been on an online shopping spree.

"I've been buying stuff I never would have thought I'd buy on Amazon," she said. "I bought outdoor cushions, I bought a barbecue cover. I couldn't believe that I could buy a can of polyurethane on Amazon."

She also bought makeup, a space heater, and a new yoga mat.

Why is she buying so much stuff? "They're gonna start charging sales tax," she said. "Just in the last couple of months, I'm sure I've saved a couple hundreds in sales tax."

But that tax break is now over. As of Saturday, Amazon is now collecting California sales tax, adding 7 to nearly 10 percent to the cost of each order.

For more than a decade, Amazon fought collecting sales tax in states where it had no physical operations. But now eight states, some with Amazon warehouses, have made the retailer tack on the tax. In cash-strapped California, sales tax on Amazon orders is expected to bring in $83 million in the next year.

With the tax fight now over, Amazon is building giant new distribution centers in California like this one outside of Los Angeles. It's one-million square feet and will allow Amazon to get items to customers cheaper and faster.The company is building near big cities, so it can eventually attempt to offer same-day shipping.

That could be another blow to bricks and mortar businesses, like Larry Moon's computer store in Pasadena, California. For now, he's just relieved Amazon's tax advantage is gone.

He thinks he'll see more customers. "Absolutely. If they're gonna spend the time to buy something, and they're in our store anyway looking at stuff, that savings won't be there, so they'll make the decision right then to buy from us."

BJ Gallagher is sticking with online shopping because it saves her time.

"I'm grateful I haven't had to pay sales tax," she said, "but my city's broke, my state is broke, my country's broke. A little sales tax from me, I'm perfectly willing to pay it."

But her tax-free buying binge is now over.