Amazon Sends Out Notice To Pre-Terminate California Amazon Affiliates

California is on the cusp of passing an internet sales tax law. Amazon has reacted by sending an email notifying California affiliates that it will terminate them if the law passes.

California is the eighth biggest economy in the world. That being said, it is also one of the poorest run and least business friendly states in the country. This year, the state is facing another huge budget deficit. After cutting spending right and left, it has the deficit down to $9.5 billion. It is playing financial games to try to get around the problem, but still faces a major deficit. Apparently, it feels the internet is the place to find the money.

The internet sales tax being implemented in California is the same old story seen in other states. The state taxes the position that affiliates located in the state give it jurisdiction to force the parent program to collect and pay the tax. This is an effort to get around a Supreme Court decision that held that states could not force out of state catalog companies to collect sales tax just because catalogs were sent into the state. 

These laws are often called Amazon laws because it is the biggest retailer impacted. Others like Overstock are as well, but we’ll stick with this name. The reaction of most of these huge retailers is predictable. They fire all their affiliates in the offending state. With no affiliates, there is no nexus connecting them to the state and sales tax can be avoided. 

The legislature has passed the internet sales tax law. It now awaits Governor Brown’s signature. In preparation for the event, Amazon has sent out notices to its affiliates warning them that they will be terminated if the Governor signs the bill into law. Other large online retailers will do the same. In short, California will have an internet sales tax law that brings in little or no revenues.

And people wonder what is wrong with this state!