California Signs “Amazon Tax”, Amazon Threatens To Cut Ties
California has just signed the Amazon Tax, a tax that will allow it to collect sales tax from online transactions. In the last court battle regarding taxes, Amazon was backed by the US Supreme Court from the 1992 ruling, stating that companies cannot collect sales tax in states where they do not have a physical presence.
States are now looking to expand that definition to include Amazon affiliates who make money off commissions. Amazon had also said it would cut ties with its estimate 10,000 California affiliates if the bill was signed, and Jerry Brown signed it yesterday.
Will Amazon follow through with its threat? Well, so far it has cut ties with affiliates in Texas, Colorado, Illinois, Hawaii, North Carolina, Rhode Island, and Connecticut, so I’ll let you be the judge.
The online retailer, Overstock also stated that they will cut ties with California affiliates. So what does this mean for the state of California? Well, it will give us an estimated $317 million more revenue per year to help our cash deficit state, according to proponents of the measure.
Opponents claim that the tax will shut down as many as 25,000 small businesses (which is 15,000 more businesses than Amazon had predicted). It will be hard to predict the true outcome until we know for sure that Amazon will make good on its threat, and will also depend on the state of affairs of current small businesses.