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

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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I read about this in the news. Although I do understand where the California politicians are coming from, this is just something I can't get behind with. I didn't expect the associates to be terminated over the whole ordeal (I just expected to pay sales tax on Amazon.com booo!) and that just makes me mad.

California, when are you going to realize that your sales tax is to high, I mean I can't even buy a graphics card without it costing $80 dollars more. If you had a variable system it would work out well but as it stands it's just too high. And now the associates are suffering because of Amazon's decision to pull out.

I understand when they say they're part of a political war and I'm not a Amazon.com associate so I can't really say for the others but I can say that California's desperation has led Amazon into another situation they don't really want to be in.

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You're telling me....I live this $h!t!!! Sales tax out here is 8.75% for everything, it really makes you think about what you are buying. California is broke and now they are cutting spending on everything(education, gov't jobs/benefits, etc) and jacking up taxes and creating new ones like this! So now we are going to have more dumb poor people, ca ftw!!!

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It's certainly seems like a lose-lose situation for Amazon and their customers in these respective states. I understand that it is a lot of local businesses that feel the squeeze before larger competitors when trying to compete with a company that provides the same or similar goods at lesser prices overall. They want to protect businesses in their area from shutting down so they think this is a good move. I can understand the benefits and the negatives but it is just a really sticky situation that could hurt these states in the long run.

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I hate to see California and the other states passing these laws. I don't blame Amazon for pulling Associates in those states, but man, it has to suck big time for the Associates - they are the ones who are losing here. I know some sites and businesses pull in a lot of money from the Associate program. Losing that revenue stream will hurt, and I would imagine that the state will also lose some money from the deal. All in all, I just don't see how states are really going to benefit much from these laws.

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With enough pressure from California residents, this law could be repealed in the near future. I live in Texas, which doesn't have a state income tax, but the sales tax is 8.75% (I think, don't often shop at big box retailers) for non-food items.

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California will be the key player in its own demise... 

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omegadoom13:
With enough pressure from California residents, this law could be repealed in the near future.

Tough luck, even if we got the entire state of California to protest, Jerry Brown would not repeal the sales tax. Not now, not ever.

Though that wouldn't be possible as most people seem to be okay with the sales tax around here. The main problem that I have with the sales tax is that it breaks the relationships with companies and California and it makes Electronics more expensive then they actually are. I'm not paying $577 for a $500 graphics card.

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The page refreshing and wiping out my comments is really getting old.

Goodnight all

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Night Neil,

I haven't had too much trouble with the page refresh recently. But I am paranoid and copy my full comment every couple minutes or so.

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Wow, who will suffer more: Amazon or California?

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i still wait and wonder how long it will take my fellow americans to realize that we are driving all the jobs away...

I'm behind amazon 100% You can't have your cake and eat it too california.

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