4 ms·

I wonder what authority CA claims over entities with no physical presence in the state. What I mean by that is this: if Amazon wants to ignore this, and still s

I wonder what authority CA claims over entities with no physical presence in the state. What I mean by that is this: if Amazon wants to ignore this, and still ships to CA residents, what recourse will the state have? If anything, wouldn't this all fall under the interstate commerce powers of the Federal government?

smallblacksun 15y ago
California is claiming that by having affiliates who are physically located in California , Amazon does have a physical presence in the state. If Amazon ignores it (and doesn't cancel the affiliate program in California, as they have said they will), California will sue them for unremitted taxes.
- JustinJM 15y ago
  CA affiliates (myself included) received a termination email today. :/
  - z92 15y ago
    That should be a separate front page news.
  - Turing_Machine 15y ago
    They terminated affiliates in Illinois quite some time ago, for the same reason. I believe they've also done this in other states. I'm not sure why the California legislature thought they were going to be special in this respect.
  - leot 15y ago
    Yup, I did too. The email had a scary title and was filled with threats and dire warnings, even though nothing's likely to go down before Sep 30th.
SoftwareMaven 15y ago
It is likely interstate commerce, since the affiliates don't work for Amazon, but it would also likely land Amazon in court in a large court battle. That battle may eventually get to the US Supreme Court, but I don't think Amazon wants the distraction. I do wonder at what point loss of sales from affiliates will cost more than collecting taxes. Apparently, Amazon thinks it's a long way out given how readily they cut ties.
- gojomo 15y ago
  Amazon would like to win this in the legislature, as they have in some states with lobbying and the pull-out threat. Or by gubernatorial vetoes, as previously in California and just a few weeks ago in Texas. Or in the courts, as they are currently challenging a similar New York law. (Amazon lost an early round; they're appealing.) They'd rather win before going to the Supreme Court but I think they'd try that route if they had to. The distraction would be worth it; this is a very, very valuable price advantage against in-state retailers like NewEgg. The Supreme Court might find this new crop of laws, and the affiliates-as-sufficient-nexus logic, sufficient. These were crafted with the previous Supreme Court decision in mind, the one from before Internet commerce (1992) that prevented sales tax on out-of-state sellers. Or Amazon might win an updated precedent which would leave only Congress with the ability to address cross-state sales.
- dangrossman 15y ago
  I have doubts that there is any point where loss of sales from affiliates would cost more than taxes. The main reason for Amazon to have an affiliate program is not awareness but SEO. The tens of thousands of people placing links directly to Amazon product pages are what keep Amazon at the top of search results for hundreds of thousands of product names, in turn driving much of their search traffic.
dcreemer 15y ago
Lab126 (which develops the Amazon Kindle) and A9 (Amazon's search technology firm) both are located in the SF Bay Area, and from the outside appear to operate as Amazon divisions. In addition, EC2 offers instances in Northern California, though I'm less familiar with their physical presence. I'm sure that Amazon's lawyers have done a very good job at structuring things such that they meet the letter of the law, but come on -- they've been in California for years.
Daniel_Newby 15y ago
> ... if Amazon wants to ignore this, and still ships to CA residents, what recourse will the state have? Charge a use tax on the goods, like sane states do. The trick would be incentivizing people to pay the use tax. (Oklahoma incentivizes by letting you pay estimated personal use tax. Pay a tiny, flat fraction of you income on your tax return and you are immune from use tax prosecution.) > If anything, wouldn't this all fall under the interstate commerce powers of the Federal government? The U.S. Congress could, if they chose, require that interstate vendors be able to collect and redistribute use tax. A standardized federally-administered database would make implementation tractable. The hard part would actually be dealing with businesses who plan to resell the goods, who are exempt from use and sales taxes.

smallblacksun 15y ago

California is claiming that by having affiliates who are physically located in California , Amazon does have a physical presence in the state. If Amazon ignores it (and doesn't cancel the affiliate program in California, as they have said they will), California will sue them for unremitted taxes.

JustinJM 15y ago
CA affiliates (myself included) received a termination email today. :/
- z92 15y ago
  That should be a separate front page news.
- Turing_Machine 15y ago
  They terminated affiliates in Illinois quite some time ago, for the same reason. I believe they've also done this in other states. I'm not sure why the California legislature thought they were going to be special in this respect.
- leot 15y ago
  Yup, I did too. The email had a scary title and was filled with threats and dire warnings, even though nothing's likely to go down before Sep 30th.

SoftwareMaven 15y ago

It is likely interstate commerce, since the affiliates don't work for Amazon, but it would also likely land Amazon in court in a large court battle. That battle may eventually get to the US Supreme Court, but I don't think Amazon wants the distraction. I do wonder at what point loss of sales from affiliates will cost more than collecting taxes. Apparently, Amazon thinks it's a long way out given how readily they cut ties.

gojomo 15y ago
Amazon would like to win this in the legislature, as they have in some states with lobbying and the pull-out threat. Or by gubernatorial vetoes, as previously in California and just a few weeks ago in Texas. Or in the courts, as they are currently challenging a similar New York law. (Amazon lost an early round; they're appealing.) They'd rather win before going to the Supreme Court but I think they'd try that route if they had to. The distraction would be worth it; this is a very, very valuable price advantage against in-state retailers like NewEgg. The Supreme Court might find this new crop of laws, and the affiliates-as-sufficient-nexus logic, sufficient. These were crafted with the previous Supreme Court decision in mind, the one from before Internet commerce (1992) that prevented sales tax on out-of-state sellers. Or Amazon might win an updated precedent which would leave only Congress with the ability to address cross-state sales.
dangrossman 15y ago
I have doubts that there is any point where loss of sales from affiliates would cost more than taxes. The main reason for Amazon to have an affiliate program is not awareness but SEO. The tens of thousands of people placing links directly to Amazon product pages are what keep Amazon at the top of search results for hundreds of thousands of product names, in turn driving much of their search traffic.

dcreemer 15y ago

Lab126 (which develops the Amazon Kindle) and A9 (Amazon's search technology firm) both are located in the SF Bay Area, and from the outside appear to operate as Amazon divisions. In addition, EC2 offers instances in Northern California, though I'm less familiar with their physical presence. I'm sure that Amazon's lawyers have done a very good job at structuring things such that they meet the letter of the law, but come on -- they've been in California for years.

Daniel_Newby 15y ago

> ... if Amazon wants to ignore this, and still ships to CA residents, what recourse will the state have? Charge a use tax on the goods, like sane states do. The trick would be incentivizing people to pay the use tax. (Oklahoma incentivizes by letting you pay estimated personal use tax. Pay a tiny, flat fraction of you income on your tax return and you are immune from use tax prosecution.) > If anything, wouldn't this all fall under the interstate commerce powers of the Federal government? The U.S. Congress could, if they chose, require that interstate vendors be able to collect and redistribute use tax. A standardized federally-administered database would make implementation tractable. The hard part would actually be dealing with businesses who plan to resell the goods, who are exempt from use and sales taxes.