Christy Pinheiro EA

The state of California, strapped for cash, has decided to go after Amazon for sales tax revenue. They do this by creating "nexus"; saying that Amazon affiliates are akin to a physical presence in the state.

This essentially forces Amazon to collect sales tax on all of its affiliate sales (interestingly, EBay seems to be immune from this, not quite sure why). Affiliates are people that earn money through adclick revenue. When you have a link on your website, and someone clicks the link and makes a purchase on Amazon, you can earn a referral fee, which is usually a percentage of the purchase.

It's a nice way to earn passive revenue.

NCIBA (a bookseller's association) has been trying to get this passed into law for over a decade, and I just got an e-mail from them about the passage of the new law, which apparently will go into effect in September.

"This afternoon, Governor Brown signed the state budget, which included a bill that requires Amazon.com and other out-of-state retailers to collect sales tax on California sales. The language closes loopholes in the existing tax code and gives the state Board of Equalization the legal cover it has been seeking.The bill contains language that deals with affiliate nexus, and Amazon today fired all of its affiliates in the state in response, but it is actually an amalgam of three separate bills that were introduced in the Legislature." -NCIBA

Unfortunately, as soon as news of the new law was made public, Amazon countered with their own news release. Amazon dumped all of its affiliates as a response. Here is the text of Amazon's response:

"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.. . 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.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

I am an Amazon affiliate (or at least, I WAS). My websites currently earn about $300-$400 per month on affiliate clicks. It's not a huge amount, but it's certainly not chump change, either. I'm going to be sad to see that money go.

A lot of businesses feel that Amazon gets a "free pass" somehow, because they feel that people choose to shop on Amazon because they can avoid sales tax. I disagree. I don't shop on Amazon to avoid sales tax. In fact, I report Use Tax (as people are supposed to). I shop on Amazon for ease and convenience. They carry many of the things I can't find elsewhere. If other stores made it so easy to shop, then I would buy from them this way, too.