July 5, 2011


I and thousands of other people received this email from Amazon last week.
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.
I have had an affiliate account with Amazon for a while now. I set up a store with items I mentioned on the blog. If readers bought anything that I recommended, or even just used the Amazon search bar, I received a small percentage for the referral without increasing the sale price to the purchaser.

Nothing really came from it. I didn't promote it much, and it was rarely used. I was considering a few things to encourage it, but now it is a moot point. Getting rid of the search box was a good excuse to rearrange the side bar. I will not be losing any income from this change, but the reasoning behind it still bothers me.

Amazon and other internet retailers have been fighting against collecting sales tax for years. Part of their continuing argument is the burden and complexity of collecting sales tax in 50 different states. But I am guessing that the automation of the process would be pretty simple these days. Yes it would be more complicated than it is now, but that does not seem to be a particularly valid reason.

As a construction company, we had to have a business license in every city we worked in. Didn't matter if we did one or a hundred jobs in that city, we had to pay the licensing fee. We also had to keep track of our total sales in each city as it affected the amount of tax we paid. It was just the cost of doing business in that city.  Collecting sales tax should be the same.

Internet companies already (presumably) have less overhead by not having outlets everywhere, but the sales tax issue gives them an additional competitive advantage over the brick and mortar store. Even if their retail price is exactly the same, their prices are automatically 8 to 10 percent cheaper (to the consumer) by not collecting sales tax. With the explosion of internet commerce, local shops (and the jobs that go with them) are losing out and disappearing.

I suppose I can't fault Amazon and others for fighting the change. They like any other company are looking for any savings and competitive advantage. But it is time this loophole was closed, both to level the playing field and to restore revenue to cities and states. I am not sure how requiring them to behave like any other local store is "unconstitutional and counterproductive".

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