Photo: Charlie Rose
Amazon is backing a referendum to overturn California’s sales tax law, the New York Times reports. Here’s what’s going on: states — deep in the hole these days — want e-tailers, and in particular Amazon, to collect sales tax on their affiliates. Amazon and others say, correctly, that they don’t have to if they don’t have a presence in the state. This debate has been going on for a while but has new urgency given the budgetary troubles of most states.
Affiliate marketing is one of the big ways Amazon generates incremental sales, so it’s a big deal for them.
Recently California demanded the sales tax from Amazon. In response, Amazon shut off its affiliates. California then said, in essence, too bad, you still owe us all the sales tax from before you shut them off. And then Amazon gave them the one-finger salute.
So here we are.
Now Amazon is fighting back with the tools it has, a referendum to change the law in California.
A couple things are worth noting here.
- Amazon is in the right here. The law and constitutional jurisprudence say it doesn’t have to collect sales tax in states where it doesn’t have nexus.
- Amazon supports a federal-level solution which is backed by 40 states called the Streamlined Sales Tax Initiative.
- Efforts to make Amazon pay tax are backed by huge bricks-and-mortar competitors like Wal-Mart, so it’s not like the big bad corporations are all on one side.
- And finally, anyone who messes with Jeff Bezos is in for a big fight.