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California Drops Bomb on Amazon......
 

Online tax bill has passed California Legislature

California lawmakers have passed a bill to force out-of-state Internet retailers such as Amazon.com Inc. to collect taxes under two different legal theories, both of which have been criticized by online sellers.

The online tax bill combines elements of other bills introduced this legislative session. Supporters expect it to bring in $200 million or more per year, $83 million from Amazon alone.

The bill, ABX1-28, was approved last week as part of a Democratic package to meet California's budget deadline. Gov. Jerry Brown promptly vetoed the main budget bills, but others, including the online tax bill, were passed but not sent to the governor.

The intent is to capture some of the estimated $1.1 billion California is owed each year in "use tax" but never collects.

The use tax is charged on purchases from out-of-state sellers for goods to be used in California. It is levied at the same 8.25 percent rate as the base state and local sales tax. California retailers must collect sales tax, but customers are expected to report and pay use tax directly to the state. Many don't.

Much of the uncollected use taxes are for Internet sales by retailers with no physical store in California that could be used as a "nexus" for tax-collection purposes. Amazon, with billions in annual revenue, only collects taxes on sales to five states. California is not among them.

The tax legislation adds several new ways to define a nexus for tax collection.

One approach requires online sellers to collect tax if they have affiliates in California that refer shoppers to their site. Similar efforts in other states generated opposition because online retailers responded by severing relationships with in-state affiliates, often small businesses. Amazon has said it would do the same in California.

In a more novel approach, the bill requires an online retailer to collect the tax if it has sister companies in California, such as a marketing arm or product developer. Even backers of that approach expect it will be challenged in court if approved.

Response From Amazon
 

Amazon to cut off California-based Web affiliates
(AP) – 16 hours ago

SAN FRANCISCO (AP) — Amazon.com Inc. said Wednesday that it will stop working with online affiliates based in California since the state passed a new rule that forces online retailers to collect sales tax there.

In an email Wednesday to California-based affiliates — individuals or companies who run websites that refer visitors to Amazon and then get a cut of any resulting sales — the Seattle-based company said it would cut ties with those who reside in the nation's most populous state if the law became effective. Gov. Jerry Brown signed the law Wednesday as part of a larger state budget package.

The rule requires online retailers such as Amazon to collect sales taxes if they have in-state affiliates.

In its email, Amazon called the bill "unconstitutional" and "counterproductive."

Passage of the law, which is projected to net $200 million annually, adds California to a growing list of states that have enacted such legislation in hopes of bringing in more tax revenue.

Billions of dollars are at stake as a growing number of states look for ways to generate more revenue without violating a 1992 U.S. Supreme Court ruling that prohibits a state from forcing businesses to collect sales taxes unless the business has a physical presence, such as a store, in that state. When consumers order from out-of-state retailers, they're supposed to pay the tax that is due, but they rarely do and it's difficult to enforce.

States are trying to get around the Supreme Court restriction by passing laws that broaden the definition of a physical presence. Online retailers, meanwhile, are resisting being deputized as tax collectors.

California will become the latest state in which Amazon has parted ways with members of its Amazon Associates Program. Already it has said goodbye to affiliates in states including Arkansas, Connecticut and Illinois due to the passage of similar online sales tax laws. Smaller competitor Overstock.com Inc. has shuttered its affiliate programs in several states due to the laws as well.

California passed such a law in 2009, but then-Gov. Arnold Schwarzenegger vetoed it.

Copyright © 2011 The Associated Press. All rights reserved.

It's all about the $$$MONEY$$$ !!

It's quite horrifying how the government believes it can get into every nook and cranny of our lives isn't it? And this in 'the land of the free'. Not that we are any better off over here
:pop2:

I'm not sure how it would work with 3rd party sellers. Do they expect Amazon to collect the taxes or the sellers?

It's one thing to get sellers to collect taxes. Getting all the sellers to actually turn it all in is just wishful thinking. They might end up spending more money trying to track down all the sellers, than they ever took in.

To clarify, I thought it applied to California Amazon Sellers but it doesn't. Only applies to those who have their own websites and advertise for amazon referring customers there.

This cant seriously hold up!

What amazon does next to its 3rd party sellers is going to be rather interesting...

If this hols up all other states are gonna follow soon! :doh:

Message from Amazon to associates....
 

Hello,

For well over a decade, the Amazon Associates Program has worked with thousands of California residents. Unfortunately, a potential new law that may be signed by Governor Brown compels us to terminate this program for California-based participants. It specifically imposes the collection of taxes from consumers on sales by online retailers - including but not limited to those referred by California-based marketing affiliates like you - even if those retailers have no physical presence in the state.

We oppose this bill because it is unconstitutional and counterproductive. 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. Similar legislation in other states has led to job and income losses, and little, if any, new tax revenue. We deeply regret that we must take this action.

As a result, we will terminate contracts with all California residents that are participants in the Amazon Associates Program as of the date (if any) that the California law becomes effective. We will send a follow-up notice to you confirming the termination date if the California law is enacted. In the event that the California law does not become effective before September 30, 2011, we withdraw this notice. As of the termination date, California residents will no longer receive advertising fees for sales referred to Amazon.com, Endless.com, MYHABIT.COM or SmallParts.com. Please be assured that all qualifying advertising fees earned on or before the termination date will be processed and paid in full in accordance with the regular payment schedule.

You are receiving this email because our records indicate that you are a resident of California. If you are not currently a resident of California, or if you are relocating to another state in the near future, you can manage the details of your Associates account here. And if you relocate to another state in the near future please contact us for reinstatement into the Amazon Associates Program.

To avoid confusion, we would like to clarify that this development will only impact our ability to offer the Associates Program to California residents and will not affect their ability to purchase from Amazon.com, Endless.com, MYHABIT.COM or SmallParts.com.

We have enjoyed working with you and other California-based participants in the Amazon Associates Program and, if this situation is rectified, would very much welcome the opportunity to re-open our Associates Program to California residents. We are also working on alternative ways to help California residents monetize their websites and we will be sure to contact you when these become available.

Regards,

The Amazon Associates Team

Can someone summarize that.

Doesnt sound good. I havent received anything from amazon yet!

This has nothing to do with sellers. This is a completely different Amazon program.