A little background first:
Standard law on sales tax, in the states that charge them, is that businesses that have a physical presence in the state, even if the particular sale is fulfilled through an out-of-state facility, are required to collect and remit sales taxes.
On the other hand, if you buy a new fishing rod from Joe’s Bait Shop in another state it’s up to you to follow the law in the state you live in and send in your sales tax equivalent (usually called a use tax). Joe doesn’t have to keep track of and comply with all tax laws in each and every state, county, city or other government jurisdiction that charges them.
California is the 5th or 6th state that has passed a law which basically says that if you have affiliates who live in their state, that is sufficient to be considered a physical presence and the company is therefore liable for charging, tracking and remitting sales taxes.
Amazon has done the same thing in each of the other states that have tried this sort of law. If they have no affiliates in the state the state then has no pretext to require sales tax collection.
It has nothing to do with a “club” or threat being held over the head of California, it’s simply Amazon protecting their business from laws being aimed at them.
Notice that it isn’t aimed at anyone who buys from an out-of-state source in general. Mail order catalogs and most smaller on-line businesses aren’t affected by it at all. It hits ONLY those companies that have an affiliate program. The big boys. Amazon. Overstock. eBay cancelled their affiliate program altogether.
Way to go California. Wipe out one more source of income for your residents. Somehow they still haven’t learned that laws have consequences that they may not want or intend. Now instead of a new source of revenue for the government, existing revenue from income taxes has been lost.
They’ll all be sitting there in Sacramento scratching their heads saying where did that money go? We were supposed to be MAKING (well, really taking) more money and instead have lost it.
One extra note for the many I’ve read saying “Well it’s about time that Amazon started baying more in taxes” or the like. When you go to Sears, is the sales tax part of the basic price? No. It’s added to it, plus a bit of the base price is from having to cover the overhead of having to comply with those laws.
Those taxes wouldn’t have been coming from Amazon, but from every Amazon customer in the state of California. Once again, another little way in which it costs more to live in California.
The really sad thing to me is that I’ve lived in California. It’s a great state with an incredible diversity of places to go and things to do. The only problem I have with it and the only reason I won’t move back there is that it’s run by the government of California.