Amazon Threatens To Leave California (AMZN)

Amazon AMZN is threatening to leave behind its thousands of California-based advertising affiliates should the state government pass legislation require Amazon to get taxes on items sold to Californian residents. In a letter to California's Board of Equalization, Amazon said four bills are unconstitutional because the bills require sellers with no physical presence to collect sales tax. "If any of these new tax collection schemes were adopted, Amazon would be compelled to end its advertising relationships with well over 10,000 California-based participants in the Amazon 'Associates Program'," wrote Paul Misener, Amazon's vice president for Global Public Policy, in a letter dated Feb. 24. In 1992, the U.S. Supreme Court ruled that companies which do not have a physical presence do not have to collect sales tax. Some cash-strapped states, however, have passed legislation requiring Amazon and other Internet retailers to collect state sales tax. As a result, Amazon has ended affiliate programs in North Carolina, Rhode Island, and Colorado. Illinois has passed legislation and may be next on the list. Texas and New York are still debating what to do with Amazon and other internet retailers. In his letter to the Board of Equalization, Mr. Misener noted that "similar legislation in other states has, counterproductively, led to job and income losses and little, if any, new tax revenue." California Board of Equalization member Senator George Runner said that Amazon's letter made it clear the bills would cause job loss in the state. "In no uncertain terms, Amazon has made it clear to me that the checks they send Californians will be cut off overnight if pending legislation aimed at regulating their operations becomes law," said Mr. Runner.