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Amazon terminates California affiliates to avoid sales tax

More than 25,000 small businesses in the state will be affected.

BY KARLY barkerPublished: July 01, 2011

California Gov. Jerry Brown approved a new sales tax on Wednesday that requires out-of-state companies to collect California state sales tax on purchases made online. California is one of many states implementing the new sales tax, and online retailer Amazon is fighting back. Hours after the bill was passed, Amazon terminated nearly 25,000 affiliate contracts in direct response to the bill. 

The affiliate program allows small business owners to refer consumers to Amazon.com in exchange for a percentage of what particular online shoppers purchase. The new tax, which went into effect yesterday, charges Amazon for any purchases made from a referring site based in California – even if the actual retailer is located outside of the state, according to the Amazon Associate Team.

“We oppose this bill, because it is unconstitutional and counterproductive,” the Amazon Associates Team stated in a letter to all of the California affiliates. “It is supported by big-box retailers, most of which are based outside California, that seek to harm the affiliate advertising programs of their competitors.”

Gov. Brown passed the bill yesterday, along with other major budget cuts. The “Amazon tax,” as it has been coined, is just one part of the governor’s plan to balance the state’s budget.

“We’ve cut our deficit by $15 billion dollars and achieved financial balance this year,” said Gov. Brown. “This is a huge step forward. But California’s long-term stability depends on our willingness to continue to pay down debt and live within our means.”

The government expects the online sales tax portion of the legislation to generate $200 million per year. However, Amazon disagrees.
 
“Similar legislation in other states has led to job and income losses, and little, if any, new tax revenue,” said the Associate Team. “We deeply regret that we must take this action.”


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