Amazon’s Response to the State of California

Amazon vs the state of California's bear from flag

Amazon’s just closed the “Affiliates” accounts of everyone in California. (These accounts allow bloggers to link to items in Amazon’s store and receive a commission when someone purchases them.) California passed a new bill requiring more online retailers to pay sales tax, and within 24 hours Amazon closed every associates account in the state of California.

“We oppose this bill because it is unconstitutional and counterproductive,” Amazon wrote in their termination notice. “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.” Amazon clearly intends to stir political pressure against California’s lawmakers, going so far as to argue that “Similar legislation in other states has led to job and income losses, and little, if any, new tax revenue.” They add that they “deeply regret” the closures, and end with a reminder that Californians can still purchase things from Amazon web sites (“to avoid confusion”).

Blogger Ezra Klein argues that Amazon opposes the bill because “it wipes out a price advantage they currently have against their competitors” — but I feel like Amazon’s position is more nuanced. Amazon says they’re already paying sales tax in a number of U.S. states, according to ZDNet — in Kansas, Kentucky, New York, North Dakota and Washington. Plus, Amazon recently expanded their physical presence into Arizona, Delaware, Pennsylvania, and Nevada, so they’ll presumably start paying sales taxes there as well.

“Look closer,” writes ZDNet columnist Violet Blue, “and you’ll see that Amazon is fighting state-by-state battles against increasingly irrational legislation.” In fact, earlier this month Jeff Bezos, the CEO of Amazon, specifically addressed the sales tax question during Amazon’s annual shareholder’s meeting. He was asked how he sees retail changing over the next decade, and how he’d resolve this online sales tax issue. Here’s how he answered the question.

“The right solution to sales tax in my view, and certainly this is Amazon’s position, and it’s been consistent. We’ve had this position for 10 years — is that the right place to solve this is federal legislation. There is an initiative called the simplified sales tax initiative. 22 states have already signed on. That legislation needs to get passed. I believe that that will happen in the time frame that you laid out. I hope it might happen much sooner than that. I think it’s the right thing to do, and I think it’d be great for Amazon.

“By the way…on the sales tax issue, keep in mind that in more than half of the geographies where we do business — certain states, as well as Europe and Asia — all together, more than half of our business is in jurisdictions where we already collect sales tax or its equivalent, like the value-added tax. So, you know, we’re very — this issue is — our position on this hasn’t changed. We think our position is a good one.

“And we’ll stick with that.”

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