June 30, 2011

California passes level-ground law, Amazon responds with scorched earth policy

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“Faster than an Amazon Associate could blink, Amazon.com sent out notices on Wednesday, telling Associates that due to California‘s new budget, which includes a new sales tax on Amazon.com purchases, their accounts would be terminated, IF the sales tax was signed into law,” which it promptly was, according to a report on Examiner.com. (A San Jose Mercury News report says Overstock.com also decided to “strike back” against California by severing its affiliate relationships.)

The tax, which goes into effect Friday and according to a Los Angeles Times report “is expected to raise an estimated $317 million a year in new state and local government revenue,” is “a common-sense idea,” said Governor Jerry Brown as he signed the bill into law.

The state’s brick-and-mortar retailers praised the new law: “You can’t give one segment of retail a 10% discount every day. It’s just not fair,” Bill Dombrowski, president of the California Retailers Association, tells the LAT.

While more and more states are requiring online retailers to collect sales taxes, the California law is unusual in that it says all retailers in the state, whether brick-and-mortar or online, must collect them regardless of whether they have a physical presence in the state (an affiliate program constitutes a physical presence) — the standard set by the Supreme Court, and the reason Amazon is severing its affiliates program. In other states, sales collection laws have prompted Amazon to close warehouses and distribution centers. (See the earlier MobyLives report.)

Which prompts a Wall Street Journal report to predict that Amazon will fight back still harder, by challenging the California law as a violation of Federal law.

Dennis Johnson is the founder of MobyLives, and the co-founder and co-publisher of Melville House. Follow him on Twitter at @mobylives

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