Amazon won't collect sales tax; cuts off California affiliates
Amazon.com has terminated its relationship with approximately 10,000 Internet business partners in California after Gov. Jerry Brown signed a law that requires out-of-state electronic retailers to collect sales tax on purchases from Golden State customers.
The termination took effect Wednesday evening, hours after Brown took action on a bill that will produce an estimated $317 million a year in new state and local government tax revenues.
Amazon said it canceled the contracts because it does not intend to comply with the new law.
"This legislation is counterproductive and will not cause our retail business to collect sales tax for the state," said Paul Misener, Amazon's vice president of global public policy.
Amazon did not say whether it planned to close a research lab in Cupertino that develops Kindle e-readers and offices of other related business entities that might make it liable to collect sales taxes under the new law.
A company spokesman declined to say whether Amazon would file a lawsuit challenging California as it did in New York state, which passed a similar statute in 2008. The New York complaint, which was based on the interstate commerce clause of the U.S. Constitution, failed in the trial court and is now being appealed.
Meanwhile, another big Internet retailer, Salt Lake City-based Overstock.com, said Wednesday that it is ending "the services of its California-based Internet advertising affiliates."
Overstock would not release the exact number of those affiliates but said that the total is in "the hundreds."
Overstock predicted that the cancellation would not affect its business and revenues.
"That effect may be small, as we have observed in these instances that the ad business terminated goes to advertisers in other states and the ad traffic to our site continues," the company said in a statement. "It is unfortunate that the bill targeted California business, but we believe the law is unconstitutional and necessitated this decision. There will be no other changes to the way we do business."
California tax officials said they are beginning the process of drafting regulations and sending out notices of the new tax to out-of-state Internet sellers. Sellers are expected to immediately begin collecting the sales taxes and the first remittances are due in about three months.
-- Marc Lifsher
Photo: An Amazon.com fulfillment warehouse in Phoenix. Credit: Bloomberg News