The Amazon Sales Tax Fight Goes To California
Image: AP AMZN Mar 1 2011, 05:20 PM EST
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Amazon is threatening to cut off affiliates in California over moves by the state government to impose sales tax. The sales tax issue with online retailers is a big one: affiliates are supposed to report and pay sales tax, but since that's basically unenforcable, nobody does this. Every once in a while, states threaten to crack down, and Amazon (and other e-commerce sites) threaten to pull out their affiliate program. That usually ensures the status quo is maintained but, of course, nowadays states are in such deep fiscal holes that they're more incented to pull the trigger.
Sales tax is one of the key things that helps online retailers stay competitive with bricks and mortar, and is a big factor in their choices. It's one of the reasons why Amazon is in Seattle (and Zappos in Las Vegas) and not California, and a reason why Amazon invested in LivingSocial instead of buying it outright.
When the unstoppable force of internet business meets the unstoppable object of the state fiscal apocalypse, watch out.
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