California is broke and looking to raise cash any way it can. Earlier today, Governer Jerry Brown signed a new tax law that would compel online retailers like Amazon to collect sales tax. The new provisions go into effect Friday.
Citing the law change, Amazon terminates Associates Program in California over tax law. In the termination email (full text is below), Amazon calls the California tax law "unconstitutional and counterproductive".
Federal law prohibits the collection of sales tax for companies that don't have a physical presence in the state. The California law seeks to circumvent the provision by asserting that affiliates constitute physical presence -- hence Amazon's termination letter to its associates. The email leaves the date open to when the law goes into effect, which presumably is Friday. Without associates, Amazon could avoid paying taxes -- as it has done in other states passing similar laws.
Amazon pays its Associates for providing links to products. If someone clicks through and buys a product, Amazon shares some of the proceeds with the the associate. Some people support themselves largely or solely on these affiliate links.
On an Amazon discussion board, some Californians expressed their displeasure. "CA stands at #50 as least 'business friendly' state", writes Robert Johnson. "Nothing coming from Sacramento would surprise me. As #50, the only thing that'll happen is that CA is now able to redefine the term 'worst state for business'".
Here's the full text of Amazon's "Notice of Contract Termination":
Amazon sent follow-up email:
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.