Amazon.com Drops Associates in California Over New Sales Tax Law

Faster than an Amazon Associate could blink, Amazon.com sent out notices on Wednesday, telling Associates that due to California's new budget, which includes a new sales tax on Amazon.com purchases, their accounts would be terminated, IF the sales tax was signed into law (which it has).

The state of California is following the example of many other states, passing an "Amazon Tax." In 1992, the Supreme Court ruled in Quill vs. North Dakota that unless a retailer had a "physical presence" in a state, it could no be required to collect sales tax on purchases made in that state.

Amazon.com does not have a warehouse or any other physical location, but what Californian and other states have done is pass laws that mandate that a physical presence is "created" by any Associates that Amazon.com has in a state. Amazon Associates is a program in which websites can post ads for products at Amazon.com. Associates receive a cut of those sales.

Thus, what Amazon.com has done in the past when a state has passed such a tax (except in New York, where it continues to battle legally) is cut ties with any Associates in that state. Since Governor Jerry Brown signed the budget and the new Amazon Tax into law on Wednesday, all California Associates will now be terminated.

It's not just Amazon.com that is cutting ties with Affiliates, either. Other programs that offer similar programs, such as Commission Junction, are seeing those retailers that currently don't have to pay sales tax in that state dump their affiliates as well. One example is Woot! at Commission Junction.

California has an extremely high sales tax, and thus Amazon.com's lack of a sales tax on purchases gives it a great advantage over other retailers. To be clear, residents in California and other states are supposed to pay the sales tax themselves as a "use tax" on their state tax returns, but few, if any, do.

Meanwhile, this new California law, like the other Amazon tax laws around the nation in other states does nothing to help the state's budget. In fact, it hurts the state. Not only will Amazon.com simply dump its Affiliates, thus maintaining its sales tax-free status, in doing so it will remove revenue from California by eliminating the income tax the state collects from those Affiliates.

The email that Amazon.com sent to its Associates can be read below.

Amazon Termination Email

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