New Law Causes Amazon to Terminate California Affiliates

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Jobs are being lost at 25,000 small businesses in California today due to a new law passed by the California Legislature. The new legislation is part of the budget package recently approved by the California Assembly and Senate. The legislation is an attempt to get Amazon to collect sales taxes by claiming that independent affiliates who choose to promote Amazon on a pay for performance basis create nexus for Amazon.

The Supreme Court has ruled that it is unconstitutional for States to force out-of-state retails to collect sales tax. California is trying to bypass this rule by claiming independent companies create a nexus for Amazon. It will likely end up in the courts, but not before lots of people lose their jobs.

The only thing that could turn this around is if Gov. Brown comes to his senses and vetoes the bill.

My condolences to all who have lost a job or a livelihood today.

Below is a copy of the letter being sent to Amazon’s California Affiliates:

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


5 thoughts on “New Law Causes Amazon to Terminate California Affiliates

  1. Day by day, month by month California becomes a more and more difficult place to live and run a business.

    Politicians seem to live in the fantasy of the past – that California is the destination state of most Americans. That becomes less and less true all the time. The natural benefits of our state can’t overcome the man made difficulties.

    Another rainy winter like the last and it will be time to leave.

    Bill

  2. Amazon actually does have a physical presence in California because they operate subsidaries (like lab126 in Cupertino that design the kindle and their upcoming tablet). The new law would make that subsidiary enough for CA to make Amazon collect tax even without the affiliates. I wonder if they plan on terminating them as well, which doesn’t sound like it would be that easy, or if they are just bluffing?

  3. frantik,

    If they want to avoid nexus caused by having affiliates they have to terminate the affiliates. I don’t know about the Colorado law, but the California law is pretty clear that it claims that affiliates create nexus if total sales through them are high enough.

    And it’s not just Amazon who is terminating affiliates. I just to another termination letter.

    Dear Affiliate,

    Thank you for your participation in the Total Gym Affiliate Program in the Google Affiliate Network. We greatly appreciate all of the hard-work and effort you have put forth to make our program a success. Unfortunately, due to recent state legislation in California, we are forced to remove all affiliates located in the state.

    Today, June 29, 2011, your account was expired from our Google Affiliate Network program. Thus, we urge you to take down all banners, text links, etc. from your sites immediately.

    Please note, if the location of your business changes, please feel free to reapply to our program.

    If circumstances do change, we will notify you. We sincerely wish you the best in all of your future endeavors.

    Regards,

    The Total Gym Affiliate Team

  4. My_Name,

    I don’t know if they can shield themselves by corporations or not when it comes to subs. Given the money involved, they may just move their sub to Seattle. In Texas, they were going shut down a distribution center because of their law. I think that’s still being negotiated.