Tax-Dodging Amazon Drops California Partners

Amazon.com abruptly ended its Associates Program for California residents Wednesday, cutting off roughly 10,000 individuals and small businesses, including this one, from a vital source of income with less than a day’s notice. Like a handful of states, California is trying to force Amazon to collect sales tax.

Full disclosure: Truthdig is among the businesses affected by Amazon’s decision. It will impact this site financially. In fairness, we are reprinting the two letters Amazon sent us below.

Amazon’s Associates Program pays sites a small percentage for referring traffic to the online retailer. As an example, when you click on a book in the Truthdig bazaar, it sends you to Amazon. If you buy the book there, Amazon pays Truthdig a referral fee (as little as 4 percent).

The California law, signed by Gov. Jerry Brown on Wednesday, requires online retailers to collect a discounted sales tax from California customers. In a letter to its California Associates, Amazon said, “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.”

Amazon is not going to turn away California’s 37 million customers because the state is asking it to collect sales tax. By dumping its California Associates, Amazon may hope to create a base of 10,000 angry constituents to put pressure on the Legislature to repeal the online tax. — PZS

Los Angeles Times:

It’s odd that a company would voluntarily dilute its business in the most populous state in the country simply because it’s being asked to collect what is lawfully owed,” Mark Hedlund, a spokesman for California Senate President Pro Tem Darrell Steinberg, told CNN Money.

According to two experts contacted by the Wall Street Journal, the California law is a likely candidate for a court challenge. California lawmakers maintain that it is designed to help level the playing field for brick-and-mortar retailers in the state.

Read more

Below are the two letters Amazon sent us Wednesday, along with the date and time each was received.

On Wed, Jun 29, 2011 at 12:24 PM, Amazon.com Associates Program wrote:

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

Wed, Jun 29, 2011 at 9:43 PM

Hello,

Unfortunately, Governor Brown has signed into law the bill that we emailed you about earlier today. As a result of this, contracts with all California residents participating in the Amazon Associates Program are terminated effective today, June 29, 2011. Those 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 before today 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 your 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. As mentioned before, we are continuing to work 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