Amazon Cuts Ties With Calif. Affiliates To Avoid Tax

Originally published on July 1, 2011 1:12 pm
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One way the company is trying to avoid it is by severing ties with about 10,000 small businesses and individual blogs based in the state which link to through their websites. NPR's Wendy Kaufman explains.

WENDY KAUFMAN: California needs money and state officials say the new sales tax could bring in two to three hundred million dollars a year. Amazon wouldn't be paying more in taxes, just collecting the sales tax on customer purchases and passing it on to the state - just like brick-and-mortar retailers do now.

BILL DOMBROWSKI: The retail industry has said enough is enough. We have to do something about this.

KAUFMAN: Bill Dombrowski heads the California Retailers Association - a trade group that pushed for the new law. He says online retailers have had a built-in price advantage because consumers often didn't pay any sales tax.

DOMBROWSKI: In California, that meant they had a 10 percent roughly price advantage every day of the year, and shoppers were turning our stores into showrooms and then going out and shopping on the Internet.

KAUFMAN: is one business that got a termination notice. It used to make a sizeable amount of revenue from referring customers to Amazon. Now, says's Thomas Swalla, that income is gone.

THOMAS SWALLA: I definitely understand the intention of what the lawmakers are trying to do. Unfortunately they affected businesses that are going to hire people and invest in their state. And it's a real effect. I mean, it has a real financial impact.

KAUFMAN: Danny Sullivan, an influential search engine blogger who had links to Amazon on his site and has received small commission payments, suggests that Amazon's tactics carry a tinge of blackmail.

DANNY SULLIVAN: It felt like Amazon wanted to use the affiliates as a kind of a pawn in all this, that by cutting loose these people, that they will go forth and try to get the law changed.

KAUFMAN: Wendy Kaufman, NPR News. Transcript provided by NPR, Copyright NPR.