Bloomberg News

Amazon Plans to Cut Ties With California Affiliates Over Tax Law

June 30, 2011

June 30 (Bloomberg) -- Amazon.com Inc., the world’s largest Internet retailer, said it will sever ties with its affiliates in California if the state enacts a new law that requires the company to collect taxes on online purchases.

California Governor Jerry Brown signed legislation yesterday mandating sales-tax collections by Web retailers, including Amazon, on purchases by state residents. The state’s pending budget plan counts on $200 million from the law. In an e-mail before the bill was signed, Amazon said the legislation was “unconstitutional and counterproductive.”

Amazon has been feuding with state governments over sales taxes, saying that imposing them on its transactions threatens jobs and leads to little new tax revenue. The Seattle-based company said it will terminate contracts with all California residents who participate in the Amazon Associates Program as of the date the law becomes effective. Members of the program put ads for Amazon on their websites, and then get compensation when shoppers click through and buy items.

The company didn’t immediately have a comment following Brown’s signature on the legislation yesterday.

Amazon and California tussled over the tax issue in 2009, when the state considered a similar measure. Arnold Schwarzenegger, governor at the time, vetoed the bill after Amazon said it would terminate the affiliate relationships. That same year, Amazon cut ties with affiliates in Rhode Island, North Carolina and Hawaii over tax disputes. The company also had a dispute with Texas earlier this year over uncollected sales tax.

--With assistance from Michael Marois in Sacramento. Editors: Jillian Ward, Nick Turner

To contact the reporter on this story: Joseph Galante in San Francisco at jgalante3@bloomberg.net

To contact the editor responsible for this story: Tom Giles at Tgiles5@bloomberg.net


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