For years, Amazon has enjoyed an unfair advantage over brick-and-mortar stores. A large part of Amazon’s overwhelming success in the marketplace can be attributed to the fact that it skirts the sales tax in most states. Until now, California was one of those states. On Wednesday, Governor Brown signed a measure into law requiring Amazon to collect sales taxes if it has affiliates in the state (read details about the new law here). The measure is expected to raise about 200 million dollars for California.
Sure, we all love buying digital cameras from Amazon. We all love saving a few dollars on sales tax. And for bloggers, well, the Amazon widgets were so darn good-looking. But there really is no good reason for Amazon to get special treatment. The new law should be welcome news to all sorts of on-the-street stores, especially book retailers like Books Inc., one of the independent bookstores that has managed to survive–and even thrive–despite the unfair competition posed by Amazon and other online retailers.
Amazon’s response was quick, angry, and in terms of PR, something of a head-scratcher. Yesterday, this email went out to Amazon affiliates:
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…we will terminate contracts with all California residents that [sic] are participants in the Amazon Associates Program as of the date (if any) that the California law becomes effective. We will send a follow-up notice to you confirming the termination date if the California law is enacted. In the event that the California law does not become effective before September 30, 2011, we withdraw this notice. As of the termination date, California residents will no longer receive advertising fees for sales referred to Amazon.com, Endless.com, MYHABIT.COM or SmallParts.com. (Go on, click the links…you never know where they might take you.)
Amazon would have us believe that the law leaves the company no choice but to terminate its relationship with affiliates. Not so. It’s basically a strong-arm tactic. The language of yesterday’s email sought to raise opposition to the law. Another email came today, stating that the program had, indeed, been terminated.
Groupon also happened to send out an email about the same law today, with a very different message:
To clear any uncertainties you might have, Groupon has zero plans to remove any affiliates from our program due to affiliate tax legislation.
Awesome. Find Today’s Daily Deal on the Best in San Francisco! Where can you find it? Oh, on Groupon, people. Not on Amazon.
If you needed one more reason not to shop through Amazon, now you have it. If you have a website that posts links to products on Amazon, and you live in California, now would be a good time to delete those links. The traffic you direct to Amazon still puts money in Amazon’s overextended pockets. The difference now is that none of that change will trickle down to you. So switch your links to other stores–preferably local ones. Books Inc. has a great website. So does Green Apple Books. So do
For more on this subject, see Andrew Ross’s article. “What Amazon gets out of its move is not entirely clear,” Ross points out. “Apart from losing the income generated by the affiliates, the company would still have to pay sales taxes on goods purchased by Californians directly from its site, assuming the law stands up to likely legal challenges.”
Of course, the good news for Amazon is that it doesn’t have to pay sales taxes on goods purchased by Californians directly from, I dunno, Target or Barnes & Noble. Of course, Amazon can afford to lose some business, and an army of angry former affiliates is unlikely to be armed with anything more dangerous than clipboards. But it takes a bit longer to repair your company image than it does to destroy it.