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USA Today is reporting a new California law designed to boost revenue by taxing the sales of out-of-state Internet retailers is causing fireworks even as it’s applauded by businesses based in the state.

Under the law, which went into effect Friday, Web retailers with a California subsidiary or marketing affiliate must now collect sales tax on purchases made by California customers. Previously, the onus was on the consumer to send in the tax, but that was difficult for the state to enforce.

In response, Amazon.com and Overstock.com ended their relationships with thousands of California-based Web affiliates. The trade publication Internet Retailer has said Amazon had more than 10,000 affiliates; Amazon wouldn’t comment. An “affiliate” is a website with advertising that links buyers to sites such as Amazon and Overstock and receives a commission from related sales.

Seattle-based Amazon called the new law “unconstitutional and counterproductive” in the termination letter it sent to California-based members of its Amazon Associates Program.

Published July 5th, 2011 4:44 am

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