Overstock Notifies California It Will Terminate Affiliates If Internet Sales Tax Passed

The internet sales tax stakes have been raised again in California. Overstock has joined Amazon in alerting California that it will terminate its affiliates in the state if an internet sales tax is passed.

California is known as one of the worst states to do business in. For instance, no other state charges an annual $800 fee for the “privilege of doing business” in it. California charges such a fee to limited liability companies and corporations regardless of how big or whether a profit has been turned.

On the internet sales tax issue, California may appear to be coming to the game late given what other states have already passed. This isn’t the case. Liberals in the state legislature have been trying to pass such laws for some time. The Governator kept vetoing them or threatening to do so. Alas, the Governator was termed out of office and tax and spend Jerry Brown is now the new Governor. 

In a letter to the Board of Equalization [the tax agency in California], an attorney for Overstock noted the site would terminate all its affiliates in the states if the law being considered is passed. This is because states try to claim authority to tax such out of state businesses by claiming their in-state affiliates create jurisdiction. It is a weak argument, but one the Supreme Court has not weighed in on yet. 

So, is Overstock bluffing? Could it stand to cut off thousands of California affiliates? Yes, it could. We know this because the last time an internet sales tax bill went to the Governor of California, Overstock preemptively terminated over 3,000 affiliates in the state. Fortunately, the Governator vetoed the bill, but here we go again. 

California is billions in debt because it spends money like Paris Hilton on Rodeo Drive…while drunk…with Charlie Sheen in tow. It is thought this new bill might raise a hundred million dollars a year, but such a number does not consider the loss of income tax given all the affiliates who lose their job. 

Once again, California gets it wrong.