Out-Of-State Online Retailers Flee California’s New Tax Law

SAN FRANCISCO (CBS SF) – More and more online shopping sites are dropping California merchants as a result of the state’s new requirement that out-of-state retailers collect sales tax from California shoppers.

Amazon.com was seeking a referendum to let California voters decide whether to overturn the new law.

The petition, filed Friday, comes after the requirement was included in a state budget signed in late June. It forces e-tailers to collect California sales taxes by expanding the definition of having a physical presence in the state. The requirement now kicks in if Amazon has a marketing arm or affiliates in the state – individuals and companies that earn commissions by referring visitors to Amazon from their websites

Amazon had thousands of affiliates in California and cut ties with them after the law’s passage.

KCBS’ Mike Colgan Reports:

This is an especially large problem for operators of California websites that provide comparison shopping services.

”A small out-of-state retailer is faced with having to make the choice, if they want to continue doing business with California-based websites like ours, they’ll have to start to begin to collect sales tax, and that is not a trivial factor,” said Rob Smahl with San Francisco-based EBATES.com, which offers coupons and cash rebates for online shopping.

Smahl said they’ve seen their business drop 20 percent in just the last week and a half.

Brick-and-mortar stores have said the online tax makes for a more even playing field.

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 This material may not be published, broadcast, rewritten, or redistributed.)

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