Bye-Bye, Blog Money: Amazon Drops CA Affiliates in Protest of Sales Tax

Over the last year or two, this blog has started bringing in a tiny bit of money through the Amazon Affiliates program. Any time someone goes to Amazon from my site and buys something, I collect a little percentage of the purchase price. Unfortunately, in an attempt to balance its budget, the California Legislature has threatened to force Amazon to collect sales tax from these affiliate purchases, and in response they have terminated all California accounts. Here's the mail I got today:

For well over a decade, the Amazon Associates Program has worked with thousands of California residents. Unfortunately, a potential new law that may be signed by Governor Brown compels us to terminate this program for California-based participants. It specifically imposes the collection of taxes from consumers on sales by online retailers – including but not limited to those referred by California-based marketing affiliates like you – even if those retailers have no physical presence in the state.

We oppose this bill because it is unconstitutional and counterproductive. It is supported by big-box retailers, most of which are based outside California, that seek to harm the affiliate advertising programs of their competitors. Similar legislation in other states has led to job and income losses, and little, if any, new tax revenue. We deeply regret that we must take this action.

As a result, we will terminate contracts with all California residents that are participants in the Amazon Associates Program as of the date (if any) that the California law becomes effective. We will send a follow-up notice to you confirming the termination date if the California law is enacted. In the event that the California law does not become effective before September 30, 2011, we withdraw this notice. As of the termination date, California residents will no longer receive advertising fees for sales referred to Amazon.com, Endless.com, MyHabit.com,  or SmallParts.com . Please be assured that all qualifying advertising fees earned on or before the termination date will be processed and paid in full in accordance with the regular payment schedule.

For me, this isn't a big deal– my site only brings me $15-40 a month, just enough to cover hosting fees and a netflix account or a six-pack of beer. However, many bloggers earn a large portion of their income from affiliate links, and this is a giant blow to them.

I'm not angry at Amazon: they sell on small margins to a mass market, and paying sales tax on top of 6+% affiliate fees is probably highly unprofitable. I'm not sure the state legislature is in the wrong, either- if brick-and-mortar shops have to pay sales tax, but Internet retailers don't, local businesses are at a severe disadvantage (not to mention the higher costs of land and labor in the Golden State).