Amazon scraps affiliate program in California as new sales tax is passed

Posted by Kate Taylor

Amazon's terminated its associates program in California in an attempt to prevent a new sales tax there - an attempt which failed, as the bill was signed into law just hours later.

The new law, signed off by Governor Jerry Brown yesterday, requires internet retailers with affiliates in California to collect sales taxes from customers living there. 

"California's sales tax generally applies to the sale of merchandise, including vehicles, in the state. California's use tax applies to the use, storage, or other consumption of those same kinds of items in the state," the state helpfully advises.

"Generally, if sales tax would apply when you buy physical merchandise in California, use tax applies when you make a similar purchase without tax from a business located outside the state. For example, you would owe use tax when you purchase something from a mail order catalog, the internet, an online auction, television shopping network, etc. located outside California and you don't pay tax to that retailer."

Similar bills have passed in New York, North Carolina and Rhode Island. Another is under consideration in Tennessee. But with California the most lucrative territory for Amazon, it fought until the last minute to get the bill scrapped.

"We oppose this bill because it is unconstitutional and counterproductive," the company told its Californian 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. Similar legislation in other states has led to job and income losses, and little, if any, new tax revenue."

A similar bill was passed by the california Senate last year, but was vetoed by governor Arnold Schwarzenegger.