In late June, Amazon severed ties with its California affiliates as a result of being unable to come to an agreement with the state about sales-tax collection. The law enacted at this time, Assembly Bill X28 1, required online retailers to collect sales tax where applicable, just as bricks-and-mortar retailers are required to do. This affected some 10,000 sellers registered under the Amazon Affiliate Program.Unwilling to enforce such legislation, Amazon severed ties with affected affiliates, just as they have done in other states enacting similar laws. But California is not other states and 10,000 affiliates is a lot to lose and a lot of partners to upset, especially for unprecedented proceedings (all of this is very nebulous as in addition to the nexus element being difficult to pin down, the rules surrounding online retail are still sort of being made up as we go along in this brave new Web-commerce world).
The outcome in late June was something that no one wanted (save for maybe physical retailers who saw it as leveling the playing field slightly). Affiliates lost income, Amazon lost income and looked a bit of a spoilsport taking its ball and going home when not getting its way, and the state and Governor Jerry Brown appeared to be limiting commerce. It was in almost everyone’s best interest to sort this out or at least postpone it.
And that is what happened through a series of compromises and the resulting solution is by no means a permanent one so much as it is buying time. Enter Assembly Bill 155, which requires Amazon to begin collecting online sales tax in California, but not until September 2012 and only if the retail giant and the federal government fail to reach a uniform online sales tax policy and get it enacted by Congress in July 2012.
So what is this? Well, basically it’s a lifeline in the form of a year-long extension and a way for both Amazon and the state of California to pass the buck and up the issue from a state’s problem to a federal one. All parties feel optimistic of resolution before the grace period expires and Amazon has publicly committed to supporting a “simple, nationwide system of state and local sales tax collection.” This would seemingly satisfy the company, the states, affiliates, and bricks-and-mortar businesses though all will have to revise their expectations and compromise in order to move forward.
In the meantime, California Amazon affiliates are being welcomed back to the fold . . . for now.