Thursday, June 30, 2011

Governor Brown Signs Death Bill for California Amazon Associates

Yesterday, I reported that Amazon was going to terminate its California associates if California Governor Brown signed a tax bill that included a tax on internet sales. Brown signed the bill, and Amazon sent out the termination notices:


Unfortunately, Governor Brown has signed into law the bill that we emailed you about earlier today. As a result of this, contracts with all California residents participating in the Amazon Associates Program are terminated effective today, June 29, 2011. Those California residents will no longer receive advertising fees for sales referred to,, MYHABIT.COM Please be assured that all qualifying advertising fees earned before today will be processed and paid in full in accordance with the regular payment schedule...We have enjoyed working with you and other California-based participants in the Amazon Associates Program and, if this situation is rectified, would very much welcome the opportunity to re-open our Associates Program to California residents. As mentioned before, we are continuing to work on alternative ways to help California residents monetize their websites and we will be sure to contact you when these become available.


  1. Another fine example of how government destroys private wealth.

  2. So, which implodes first, the economy, or the Govt.?

    I'm rooting for one, but expecting the other. (sigh)

  3. Take your web site outside of california. you can rent a server, or virtual server, and administer it with a simple graphical dashboard. Whats the theory for collecting sales tax on a referral from an Arizona located web site?

    There is the portion where if the business ownes an independent business in Calif (and Amazon does) sales tax is due, but that would apply to all sales to Calif residents by Amazon no matter how generated and Amazon is sure to fight that.

    If States keep doing that people should just move their hosting offshore. All the jobs and revenue of web hosting could depart.

  4. There is nothing quite like the greed and self interest of government. Over a long enough period of time, all governments destroy the wealth of its citizens. California is just doing its best to be first!

  5. What determines the locus of the affiliate? Surely their legal address, not the location of their web server. Why not just create an LLC in Arizona, rent a mailbox there and use that? It's inexpensive, certainly cheaper than a Nevada corporation.

  6. @Munch & @Anonymous

    Since it's based on residency, the location of the server is irrelevant. My server is already hosted outside of California.

    I don't think an LLC in AZ will help either. California mostly treats a corporation as if it were a "California Corporation" for tax purposes if the main shareholders reside in California and taxes it accordingly. That's why when I incorporated many years ago, I did it as a CA corp. According to my attorney, incorporating in another state had very little benefit relative to CA law. I suspect the AZ arrangement would be interpreted similarly with respect to Amazon.

  7. Anonymous--

    If you do business (physically) in California, then, agreed, you might as well just have a corp or LLC there, as California requires you to register your "foreign" (Arizona) entity to do business.

    But everything about a web site--the entity that owns it, the state in which that entity is registered, its place of business, its servers--could be outside California, even if its owners are in California, and even if it has contractors or even employees in California. I believe (but I'm not an attorney), that none of these connections to California gives a business a "presence" there.

    So I expect some will take this route, just as some probably already have in New York.

  8. Amazon probably determines the "residency" of its affiliates by the mailing address the affiliate provides, and if it is large enough affiliate to use direct deposit, the address of its bank account.

    Form an Arizona LLC, open a Phoenix bank account and get an Arizona UPS Store address.

    Amazon won't terminate you, you are not responsible as the owner of a referring web site for collecting sales tax so Calif has no claim against you, and you get to continue your affiliate relationship and comissions.

    Just my guess.