You know how regular websites can join an "affiliate program" with major retailers like Amazon.com? Ads for books are shown on the website, and if the customer uses that link to purchase the item, the website receives a small percentage. It's a good way for websites to make a little money and for retailers to increase sales.
California decided to tax that. They just passed a law, effective immediately, that would tax such sales whether or not the retailer has a business presence in the state. They are hoping to raise $200 million a year in new tax revenue. But is that what will happen?
Of course not.
Amazon.com has already sent out letters to 25,000 websites cancelling their affiliate status.
http://www.ocregister.com/articles/amazon-306409-affiliate-california.html
Amazon has already emailed its termination of its affiliate advertising program with 25,000 websites. The letter says, in part:
(The bill) specifically imposes the collection of taxes from consumers on sales by online retailers - including but not limited to those referred by California-based marketing affiliates like you - even if those retailers have no physical presence in the state.
We oppose this bill because it is unconstitutional and counterproductive. It is supported by big-box retailers, most of which are based outside California, that seek to harm the affiliate advertising programs of their competitors. Similar legislation in other states has led to job and income losses, and little, if any, new tax revenue. We deeply regret that we must take this action.
The new law won't affect customers, Amazon said, but added that the immediate termination of the affiliate program also applies to endless.com, myhabit.com and smallparts.com.
This may be an unintended consequence, but it was entirely foreseeable. Once again, the real world demonstrates that higher tax rates aren't good for businesses OR the economy.
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