SAN FRANCISCO (CBS / AP) — Inc. said Wednesday that it will stop working with online affiliates based in California since the state passed a new rule that forces online retailers to collect sales tax.

In an email Wednesday to California-based affiliates – individuals or companies who run websites that refer visitors to Amazon and then get a cut of any resulting sales – the Seattle-based company said it would cut ties with those who reside in the nation’s most populous state if the law became effective. Gov. Jerry Brown signed the law Wednesday as part of a larger state budget package.

The rule requires online retailers such as Amazon to collect sales taxes if they have in-state affiliates.

In its email, Amazon called the bill “unconstitutional” and “counterproductive.”

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Passage of the law, which is projected to net $200 million annually, adds California to a growing list of states that have enacted such legislation in hopes of bringing in more tax revenue.

Billions of dollars are at stake as a growing number of states look for ways to generate more revenue without violating a 1992 U.S. Supreme Court ruling that prohibits a state from forcing businesses to collect sales taxes unless the business has a physical presence, such as a store, in that state. When consumers order from out-of-state retailers, they’re supposed to pay the tax that is due, but they rarely do and it’s difficult to enforce.

States are trying to get around the Supreme Court restriction by passing laws that broaden the definition of a physical presence. Online retailers, meanwhile, are resisting being deputized as tax collectors.

California will become the latest state in which Amazon has parted ways with members of its Amazon Associates Program. Already it has said goodbye to affiliates in states including Arkansas, Connecticut and Illinois due to the passage of similar online sales tax laws. Smaller competitor Inc. has shuttered its affiliate programs in several states due to the laws as well.

California passed such a law in 2009, but then-Gov. Arnold Schwarzenegger vetoed it.

KCBS’ Anna Duckworth Reports:

(Copyright 2011 by CBS San Francisco. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)

Comments (8)
  1. genomega1 says:

    and the beat goes on…

  2. Frank says:

    Jerry Brown and his cohorts never saw a tax they didn’t like.

  3. John says:

    Good for Amazon! Too bad the affiliates are now going to loose income. I wonder if their loss in revenue will mean they pay less in taxes to California. Ya think??

  4. urolizzard says:

    Jerry Brown havn’t you learned ? Any Functional person or business will move if abused. Now a Dysfunctional person or business will whine and look for government handouts or shelters. Abuse business or a functional person enough functional changes will be made. A functional women or a man will move and find another. A functional buiness will find another too. Jerry Brown and the State of California need a lot of therapy. For the rest of us cope or move.

  5. urolizzard says:

    Hey Jerry:
    You can’t tax Businesses or people that move. With your shrinking base of employers job creators and hard working people as revenue sources how are you going sustain your tax adn spend addiction. I and may others that predicted this know the answer. California will not be the California of Inovation success and prosperiity but a large Island of dysfunction and despair. Like in the Song ” When will they ever learn” Repeating the mistakes of past countries and civilizations over the past 1000 years. Or maybe you would like to give more millions to other dysfunctional people like the mother of a Grant the Bart Train hoodlum.

  6. urolizzard says:

    Hey Jerry:

    Rather than sit on the sidelines and laugh at the states folly .I will offer you some advise. Invite productive businesses to the state with absolutely no taxes on products or services. Californians and people from other states will be able to buy more products cheaper in California producing more Jobs more employed people to tax. More employed people means spreading the necessary tax burdon over a larger group of poople reducing taxes for each tax payer. Want to stimulate the economy even more. Have a California Income tax holiday for one paycheck immediate California sales tax infustion. Its fair to both employed workers who would now be not double taxed and beneficial to the economy creating moreJobs to process new orders and more tax payers.

  7. Monster says:

    One more nail in California’s coffin. Regardless of these bone-headed moves californians will continue to elect the worst possible politicians to public offices. They would rather talk about gay marriage, than about the impending implosion of the state. Californians never learn from their political mistakes. You will see. Obama will take CA again, regardless of his spectacular failure as the President.

    Tax and spend! Tax and spend! Tax and spend! Tax and spend! Tax and spend! Tax and spend! Tax and spend!

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