Gov. Jerry Brown has signed into law California's tax on Internet sales through affiliate advertising which will immediately cut small-business website revenue 20% to 30%, experts say.
The bill, AB 28X, takes effect immediately. The state Board of Equalization says the tax will raise $200 million a year, but critics claim it will raise nothing because online retailers will end their affiliate programs rather than collect the tax.
FORTUNE - California Gov. Jerry Brown on Wednesday signed the so-called "Amazon tax" into law. The measure forces out-of-state retailers (not just Amazon) to pay taxes on sales within the state. Earlier on Wednesday, Amazon (AMZN) sent notices to its affiliates in California, warning them that if the measure became law, the company would have to terminate its contracts with them because it's the affiliates' presence in the state that makes Amazon subject to the tax. Amazon has pulled similar maneuvers in other states where such taxes were imposed.
California, like other cash-strapped state governments, is flailing about for new sources of revenue. Proponents of the tax claim it will raise $317 million in revenue a year. But California should look around at other states that have tried this tactic: it usually doesn't work out so well.
I feel like i must be missing something. It sounds like an internet sales tax to me.
Why would it reduce small business income? Wouldn't they just pass the tax along to the consumer? Anyone doing internet business in the state of California would be paying it so it's not like people can just order thier stuff from a different retailer. I can't imagine a retailer choosing not to do business with an entire state of consumers because they have to charge them sales tax. All non-internet business charge sales tax, don't they?
I think the state has the right to require all businesses to pay sales tax, not just brick and mortar ones.
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