THUD! Did Congress hear that?

Yesterday California passed legislation requiring any out-of-state retailer with an affiliate in California (or warehouse/drop-shipper, or any other physical or economic presence)  to collect California’s sales tax. It’s the seventh state to enact affiliate nexus legislation, after New York, North Carolina, Rhode Island, Connecticut, Illinois, and Arkansas.

This is a signficant move, but unfortunately it’s the wrong one. As a result of this legislation, affiliates face either losing their income or moving out of the state. In fact, in less than 24 hours, Amazon and Overstock have already ended their affiliate programs in California, just as they did in the other states when they passed similar legislation.

A better option is still available for California by simply joining the Streamlined Sales and Use Tax Agreement and urging Congress to enact federal legislation such as the much anticipated the Main Street Fairness Act (or MSFA). Enactment of the MSFA will enable the states to repeal affiliate nexus laws, and in so doing, restore a significant revenue source for many of their smallest businesses, while also gaining the legitimate authority to collect significantly more revenue.

So, the good news is that as the eighth largest economy in the world, California attracts a lot of attention. There’s a reason for the saying “As goes California, so goes the nation.” Congress cannot possibly ignore the message that California is sending: states want and need federal legislation allowing them to require out-of-state retailers to collect sales tax.

But if anyone in Congress is still wondering if this is matters in their district, here is a small portion of the local news websites  that have published the news that Amazon has dropped its California affiliates (not including California sites):

We are confident that with California’s bold statement, Congress will acknowledge the unmistakable THUD heard ’round the country yesterday. California’s legislation is just the latest plea from states that federal legislation regarding online sales tax collection is absolutely necessary. It’s time for Congress to act.

11 Responses to THUD! Did Congress hear that?

  1. Kumar says:

    Amazon shouldn’t be able to dodge sales tax collection by simply cancelling affiliates.

    Amazon has several subsidiaries in California:

    >Lab126 Kindle R&D subsidiary operating in Cupertino,CA
    >A9.com search subsidiary in Palo Alto,CA
    >a2z development center in in Orange County, CA; San Francisco, CA; and San Luis Obispo, CA.
    >IMDb Movie Database company in Los Angeles,CA
    >Alexa toolbar company in Presidio, San Francisco, CA

    If all this does not constitute “Nexus” then surely this California legislation was very ineptly drafted.

    Juxtapose this with a red state, Texas, going after Amazon for $269 million in uncollected taxes on account of a small distribution center in Irving,TX

  2. […] who knows what they’re talking about, and it’s particularly relevant in light of California’s recent legislation. We highly recommend you head over to the Post and read the entire […]

  3. […] A new column on SFGate.com, the San Francisco Chronicle website, speculates on what’s next for online retailers and state legislators now that California has passed affiliate nexus legislation. […]

  4. […] our regular readers are well aware, more and more states (like California) are striking out on their own to try and solve this problem by enacting affiliate nexus […]

  5. […] have to hope that Congress hears this voice of support for Streamlined and federal legislation. The recent passage of affiliate nexus legislation in California has brought the issue to the forefront of the national conversation. It’s time for Congress […]

  6. […] A new article in StorefrontBacktalk gives a very thorough and balanced background on online sales tax collection, framed by a discussion of California’s new affiliate nexus legislation. […]

  7. […] for the Main Street Fairness Act (although it isn’t mentioned by name.) In discussing California’s recent sales tax legislation and Amazon’s response to it, the author makes a clear case for federal, rather than state, […]

  8. […] The New York Times just published an article covering the AMZN proposed referendum to repeal ABX1 28. […]

  9. […] Attorney General for a referendum to repeal California’s recently enacted ABX1 28. Opponents say Amazon's proposed referendum is […]

  10. […] California’s Attorney General has allowed Amazon’s proposed referendum to repeal ABX1 28. […]

  11. […] AB 155 (as amended) repeals ABX1 28 (See our original post “THUD! Did Congress Hear That?“) […]

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