California Tax Ploy: Amazon affiliates are the victims, other web brands offer alternatives

Beginning today, is supposed to start collecting sales tax on goods it sells in California.

So are and other out-of-state online retailers and catalog houses doing business here. Ready or not, like it or not, it's now the law.

First payments will be due by the end of October, 30 days after the close of the third quarter, according to the State Board of Equalization, the state agency in charge of implementing the "e-fairness" law.

Amazon and Overstock, which announced they have cut off their California affiliates, are by no means alone. Approximately 2,000 letters and questionnaires are to be sent to individual out-of-state online retailers nationwide, to ascertain whether they fit the criteria outlined in the law.

The process will take some time, board officials said - they've been given a meager $1,000 out of the general fund to get the law up and running - but suggest companies start collecting now to meet their October bill.

"Any retailer that falls under the new criteria should begin collecting the (sales) tax as of July 1," spokeswoman Anita Gore said.  

 According to the law, an out-of-state online retailer with any kind of "nexus" in the state - a physical or corporate presence, not just a brick-and-mortar retail outlet - is liable. With one exception: retailers who have sold no more than $500,000 worth of goods in California in the previous 12 months. (Full text of the law, ABX1 28, at

The concession was aimed primarily at San Jose's eBay, a strong opponent of all such online tax proposals, saying they hurt the company's "business model," which relies on individuals and small businesses selling stuff on their auction site. Ebay initially pushed for an exemption of $2 million.

In a statement Thursday, an eBay vice president, Tod Cohen, said, "We believe this exclusion covers the vast majority of all eBay sellers." But his statement added that eBay "is committed to protecting all sellers from unconstitutional sales tax laws."

Unclear on the concept: Apart from calling it "counterproductive," the law apparently "will not cause our retail business to collect sales tax for the state," according to Paul Misener, Amazon's vice president for global public policy.

Perhaps Misener believes tossing 25,000 heretofore loyal California "associates" over the side is enough to do the trick. Or, maybe he's not aware of that part of the law referring to any entity "that - either by itself or through a subsidiary (in California) - designs or develops products sold by the retailer."

On Amazon's corporate website, under "United States Subsidiaries," we find four California locations for A2Z Development Center Inc. - "an innovative customer-centric software development company" - including in San Francisco and Cupertino, where the Kindle was developed; a search engine technology company called in Palo Alto; and, in San Francisco, Alexa, another Amazon search company.

We don't know whether Amazon intends to close them down, or move them out of state - it didn't respond to a request for comment about its intentions toward the law, for example, whether it will be setting sales tax money aside beginning today.

Assurances: The real victims, so far, are Amazon's and Overstock's affiliates.

Utah's Overstock wouldn't say how many of them there are in California, except they number "in the hundreds." One wonders what Alameda County officials, who sold the naming rights to the Oakland Coliseum (now Coliseum) for a song, are thinking about that.

According to Amazon's Dear John e-mail sent out Wednesday, "As of the termination date, California residents will no longer receive advertising fees for sales referred to,, MYHABIT.COM or"

But it goes on to assure the affiliates, "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."

Amazon and Overstock affiliates looking for alternatives might heed the advice of Board of Equalization member and former Chairwoman Betty Yee: "Other major retailers such as Sears, Barnes & Noble, Best Buy and Walmart have all extended invitations for these affiliates to join their network programs," she said in a statement Thursday.

Yee could have added Target, which has also opened its arms to those being spurned. Expect to see more invitations and full-page ads from these and other retailers in the near future.

Other options: Some affiliates are calling for more direct action. San Francisco writer and best-selling author Michelle Richmond is calling on fellow members of Word of Mouth Bay Area, a writers group, to delete Amazon links from their websites.

Said her e-mail to the group: "Amazon needs to know that the people who write and sell books (not to mention music, movies, etc) don't (think) Amazon and other big internet retailers deserve the unfair edge they get by not taxing products sold online in other states."


This article appeared on page D - 1 of the San Francisco Chronicle