Earlier today, Amazon.com sent an email to all California residents who participate in its affiliate program, known as Amazon Associates. The letter notifies approximately 25,000 of Amazon’s California affiliates of the impending termination of their affiliate contracts by Amazon.
This move by Amazon is in response to legislation in California, signed into law by Governor Jerry Brown today, that will force online retailers such as Amazon to collect state sales tax if they have affiliates in the state. Amazon is strongly opposed to this legislation.
On the other hand, the State of California expects to receive up to $200 million in additional revenue per year and sees this legislation as a necessary move to close their budget gap.
This move by Amazon was widely expected by affiliate industry observers and Amazon’s California affiliates. When other states such as Connecticut, Illinois, North Carolina, Arkansas and Rhode Island passed affiliate taxes in recent years, Amazon terminated the Associates program in those states.
The only state with an affiliate tax where Amazon still operates its Associates program is New York, where Amazon is in the middle of a lawsuit against the state.
According to Amazon’s email, the affiliate contracts will be terminated as of the effective date of the legislation.
Here is an excerpt from the email:
For well over a decade, the Amazon Associates Program has worked with thousands of California residents. Unfortunately, a potential new law that may be signed by Governor Brown compels us to terminate this program for California-based participants. It 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.
As a result, we will terminate contracts with all California residents that are participants in the Amazon Associates Program as of the date (if any) that the California law becomes effective.
Stay tuned to the AffiliatePrograms.com blog for more updates on this story.