California tax drives Amazon affiliate program out of state

No Amazon affiliates live in California. Amazon canceled thousands of its affiliate members to avoid new taxes imposed by the state.

Web sites that sell its products because of a Democrat sponsored bill that taxes sales made through affiliate advertising programs. Analysts say that had Amazon not cut out its California affiliates that those affiliates would have lost as much as one-third of their income from the program.

Cash cow

Proponents of big government have long craved increased taxes on Internet activity, considering it as a major frontier of untapped cash that could be used to foot the bill for government programs that now face cuts or cancellation.

Idealistic as always, the government projected income of about $200 million from the new tax which immediately took effect when Governor Jerry Brown signed the so-called “Amazon tax” into law.

Critics of the bill projected that the bill would raise $0 because retailers would cease their affiliate programs rather than collect the tax. Guess who was right?

Circumventing the Supreme Court

Longer than a decade ago, the US Supreme Court said that states cannot tax Internet retailers that do not have a physical presence in their state. To get around that, New York decided to name affiliate marketers as agents of Internet companies, meaning that companies like Amazon must collect New York sales tax on all sales referred to them by affiliates within the state. A pending lawsuit may overturn that law, according to an Orange County Register story.

Since the New York action, other states have moved to tax Internet affiliate sales with disastrous results. Somehow California thought it would turn things around.

ADIOS!

Amazon summarily terminated about 25,000 affiliates before the ink from Governor Moonbeam’s pen dried, leaving many Californians without a way to earn money. Those affiliates may resume their business if they leave California.

Dim future for affiliates

As states desperately seek to boost revenue in lieu of cutting costs, expect Amazon and other affiliate programs to altogether disappear from the online landscape.