It's Amazon vs California

Los Angeles: Escalating its fight to thwart a new levy on internet purchases, Amazon.com says it will ask California voters to overturn a state law requiring all companies with operations or affiliates in the state to collect sales tax. Amazon has refused to collect the 7.25 per cent base sales tax since the law took effect on July 1, saying it is unconstitutional.

It will seek a referendum vote as early as February, which could ignite an expensive and noisy political battle pitting the deep-pocketed Seattle-based internet seller against a much larger coalition of brick-and-mortar retailers such as Wal-Mart, Best Buy and Target.

"This is a referendum on jobs and investment in California," said Paul Misener, Amazon's vice president of global public policy. "We support this referendum against the recent sales tax legislation because, with unemployment at well over 11 per cent, Californians deserve a voice and a choice about jobs, investment and the state's economic future."

While Amazon has not ruled out a suit to block the law, analysts said taking it directly to voters might be cheaper and more effective than a lawsuit that may be tied up in courts for years and run up huge legal bills.

Amazon has began the legal process of qualifying a referendum with California's attorney general.