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Amazon to California: Read My Lips, No Online Sales Tax
The bill requires these and other online retailers to collect taxes if they have in-state affiliates. Both companies operate nationwide sales programs that rely on in-state companies to drive their own online business -- boosting online retail profits and leaving local coffers empty, the state argued. The law is intended to bridge that perceived tax gap.
But Amazon was quick to turn the tables. Calling the new law unconstitutional, Amazon sent an email Wednesday to California affiliates immediately severing ties with them -- and putting those businesses in the crosshairs.
"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 said before the ruling in an email obtained Fox Business.
In a follow-up email sent after Gov. Jerry Brown signed the bill into law, the company unequivocally pulled the plug.
"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."
By ending these local affiliate programs, Amazon and Overstock should largely exempt themselves from the law -- meaning your books and other goods probably won't go up in price. (Amazon operates other businesses in California that may force it to comply.) But other online stores will surely be forced to comply.
But Amazon was quick to turn the tables. Calling the new law unconstitutional, Amazon sent an email Wednesday to California affiliates immediately severing ties with them -- and putting those businesses in the crosshairs.
"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 said before the ruling in an email obtained Fox Business.
In a follow-up email sent after Gov. Jerry Brown signed the bill into law, the company unequivocally pulled the plug.
"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."
By ending these local affiliate programs, Amazon and Overstock should largely exempt themselves from the law -- meaning your books and other goods probably won't go up in price. (Amazon operates other businesses in California that may force it to comply.) But other online stores will surely be forced to comply.
Jonathan E. Johnson III, president of O.co (also known as Overstock.com), told FoxNews.com it made a similar move yesterday, terminating its relationship with hundreds of businesses.
“We think this law is unconstitutional. But rather than fight it in every state, it's just easier to terminate the affiliates and let the businesses migrate elsewhere,” Johnson told FoxNews.com. Calling the legislation "shortsighted," he noted that the biggest affiliates move to other states in response -- it’s the smaller ones that suffer.
"If you're a blogger, living in Orange County, you're not going to move. It's hardest on these people … and in these tough times, every penny counts," Johnson said.
The legislation was intended to eliminate a perceived business impediment for brick-and-mortar retailers in the state, according to California Democratic Assemblywoman Nancy Skinner, who helped develop the bill. State and local sales taxes can total 10 percent in some California cities, and big-box retailers like Wal-Mart complained that tax-free sales on Amazon were an unfair edge.
The new law makes the state the latest -- following laws in at least nine other states including Arkansas, Illinois and Connecticut -- to be dropped by these retailers from affiliate programs.
“We think this law is unconstitutional. But rather than fight it in every state, it's just easier to terminate the affiliates and let the businesses migrate elsewhere,” Johnson told FoxNews.com. Calling the legislation "shortsighted," he noted that the biggest affiliates move to other states in response -- it’s the smaller ones that suffer.
"If you're a blogger, living in Orange County, you're not going to move. It's hardest on these people … and in these tough times, every penny counts," Johnson said.
The legislation was intended to eliminate a perceived business impediment for brick-and-mortar retailers in the state, according to California Democratic Assemblywoman Nancy Skinner, who helped develop the bill. State and local sales taxes can total 10 percent in some California cities, and big-box retailers like Wal-Mart complained that tax-free sales on Amazon were an unfair edge.
The new law makes the state the latest -- following laws in at least nine other states including Arkansas, Illinois and Connecticut -- to be dropped by these retailers from affiliate programs.