Amazon, California Affiliates and Taxes

Amazon, California Affiliates and Taxes

To my surprise and many others, the California state law which went into affect on July 1, 2011 came quickly.

And as you can expect, Amazon and other online retailers will or are going to shut down their affiliate programs in the state. It has been estimated that for Amazon affiliates alone, that amounts to about 25000 sites that will no longer be able to advertise Amazon products. All sites, no matter how much money they have made for Amazon will shut down because of the new California law.

The governor of California thought that this is a "common sense idea". However, did the state government just take an overview of how much revenue they thought they were going to make, without figuring in the possible lose of revenue, or the possibility that the bigger affiliates would move from the state? I wonder?

For those states that do not have these laws, it may be wise to court these companies, they may end up being the greatest revenue gainers in the long run.

Check out below to determine where your state is in the mix of the new law.


States where Amazon collects sales taxes:
Kansas
Kentucky
New York
North Dakota
Washington State

Why only these states? These are the only markets where it has physical stores or offices.


States where Amazon has cut ties with affiliates:

California
Illinois
North Carolina
Colorado


States at risk of being cut off by Amazon due to possible legislation:
Nevada
New Mexico
Missouri
Arkansas (Law Passed)
South Carolina
South Dakota
Minnesota
Vermont
Massachusetts
Rhode Island(Law Passed)
Connecticut (Law Passed)

Amazon has continued to use the 1992 Supreme Court Ruling of (Quill Corporation v. North Dakota) that prohibits a state from forcing a business to collect sales tax unless it has physical stores in the state.

However, because of the recession, and the shortfall many state budgets now have, the state governments are trying to get around these restrictions by passing laws that expand the definition of physical presence.
The states target are e-commerce sites that work with affiliates.

In essence if an affiliate is within the said state that has these new expanded laws of physical presence, they (Amazon) must pay the sales tax because of the sale that was created by the affiliate living within that said state.



As the states attempt to find ways to collect revenue, a new situation could be looming. Could it be federal law or the constitutionality of the state laws regarding this matter.