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Jun 30

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Amazon Drops the Hammer

Today I received the following e-mail.

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

Governor Brown in fact did sign the bill as part of the final budget agreement package.

This was a completely expected letter based on prior statements from Amazon regarding its reaction to earlier versions of the bill.

In case any of my friends and associates are worried, my Amazon Affiliates account was part of a prototype of a podcast site that never went into full production and never sold a single thing.  So no, I won’t be calling up the moving vans and taking Amazon up on their suggestion to move to another state.  But, even if my Amazon Affiliate membership was a revenue stream, there would be plenty of choicesof affiliate programs like Target.com, BarnesAndNoble.com, etc. that already collect sales tax and offer similar commissions.  There might be many reasons for a small business to want to leave California, but losing the Amazon Affiliates membership is not likely to be high on the list.  As for the vague “working on alternative ways to help California residents monetize their websites” that may be as simple as offering pay per view or pay per click advertising rather than a sales commission.

What may be a bigger issue for Amazon, and for California, is that the bill also broadens the definition of a nexus to include having ownership of a related business in California.  Amazon has two such businesses that might qualify:

  1. Lab126 Inc.  in Cupertino, which develops the Kindle electronic book readers.
  2. An office for its Internet Movie Database unit located in Studio City

Relocating or divesting these may present more of a problem.  On the other hand, Amazon has demonstrated a steady  determination to avoid collecting sales taxes in significant states even at considerable inconvenience and cost.  For example, they decided to close a Texas distribution center when the state decided that it required that Amazon pay Texas sales tax.

About the author

Daniel Nolte

Architect, Network Administrator, Computer Forensics Administrator, Voiceovers. website,

Permanent link to this article: http://betweenthenumbers.net/2011/06/amazon-drops-the-hammer/

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