Capitol Alert

The latest on California politics and government has set off a feeding frenzy in Sacramento, and it has nothing to do with free shipping.

Political consultants have been giddy with the prospect of an expensive ballot war ever since Amazon filed papers this month to overturn a new online tax collection law. If the Seattle-based company can gather enough signatures for a referendum and survive a legal challenge, Amazon ($96 billion market value) would square off against retail giant Wal-Mart ($186 billion) in the June 2012 election.

Other Fortune 500 retailers and labor groups would also join the fray over whether the most populous state in the nation should force online stores to collect taxes on purchases.

"It's very rare that you see so many deep pockets preparing to engage in the same fight," said Dan Schnur, a former GOP strategist and director of the Jesse Unruh Institute of Politics at the University of Southern California.

Under Assembly Bill X1 28, a bill passed by Democratic lawmakers and signed by Gov. Jerry Brown last month, major online retailers would be required to collect sales taxes on purchases by Californians. Democrats believe the proposal would raise $200 million in the first year.

Though 10,000 Amazon affiliates complained about job losses once the company cut off its customer referral program in California in an attempt to avoid collecting taxes, a referendum of the so-called "Amazon tax" would create instant employment for select Capitol insiders.

Not since billionaire Meg Whitman ran for governor has Sacramento seen such a rush to line up political work. Political consultants across town are scrambling to get a piece of the action, and one Republican strategist admitted he was pitching both sides of the measure.

"Usually these fights divide along very predictable ideological lines," Schnur observed. "But because you have factions of the business community in opposition to each other, any consultant can sign up with either side."

Sacramento law firm Nielsen, Merksamer, Parrinello, Gross & Leoni filed the referendum papers and is providing legal counsel to Amazon. A nascent coalition of online retailers has yet to finalize other partners, but Sacramento-based strategist Rick Claussen has been tied to a potential campaign, as has former Department of Finance director Michael Genest.

Genest said he does not yet have an agreement. But he has engaged in talks and said his firm, Capitol Matrix Consulting, "would be an influential voice if someone wants to bring us aboard."

On the other side, Mercury Public Affairs, has worked with brick-and-mortar retailers all year to push for the tax law. The firm's Sacramento office includes Gov. Arnold Schwarzenegger adviser Adam Mendelsohn, former Assembly Speaker Fabian Núñez and former Schwarzenegger aide Becky Warren.

Brian Brokaw, a Democratic strategist who ran Attorney General Kamala Harris' campaign last year, has been responsible for coalition building with retailers, small businesses and labor groups.

Several sources said Democratic strategist Gale Kaufman is in serious talks to work on the campaign against Amazon. Kaufman advises the California Teachers Association and led the labor coalition's defeat of Schwarzenegger's 2005 special election measures.

If Kaufman joins the effort, she and labor groups would face an odd bedfellows moment with Wal-Mart, a frequent target of union criticism. Kaufman declined to comment for this story.


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