California Approves Online Sales Tax

Amazon severs ties with affiliates in the state.

by staff writer
- Jun 30, 2011

California Gov. Jerry Brown signed into law Wednesday a bill that requires online retailers to collect sales tax, prompting Amazon to cut ties with affiliates in the state.

Assembly Bill 28 calls for any retailer "engaged in business" in the state of California that makes more than $50,000 a year to register with the State Board of Equalization, collect sales tax from California buyers, and pay the collected sales tax to the board. The new law is expected to bring in about $317 million in revenue each year, according to reports.

The new law—which takes effect immediately—would cost large online retailers like Amazon and millions, prompting the two companies to say they'll no longer do business with affiliates in California. Within hours after the bill was passed, Amazon sent e-mails to its California affiliates informing them that the company would no longer use their services.

Amazon's move was expected. The Internet retail giant has cut ties with affiliates in other states that enacted similar legislation. Earlier this year, Amazon closed a distribution center in Texas after that state demanded $269 million in uncollected sales tax for the years of 2005 to 2009.

However, Amazon recently proposed to bring 5,000 jobs to Texas in exchange for a sales-tax exemption for the next four and a half years. As part of the deal, Amazon promised to spend $300 million to open new distribution centers in Texas and asked the state controller to set up a Web site, where Texas Amazon shoppers could report and pay sales tax on their Amazon purchases. It is unclear if that deal will go through.

About the Author

Auctiva staff writers constantly monitor trends and best practices of those selling on eBay and elsewhere online. They attend relevant training seminars and trade shows and regularly discuss the market with PowerSellers and other market experts.

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