Amazon versus California

In the news yesterday, Amazon is threatening to discontinue affiliates in California because the latest legislation passed concerning internet sales should be taxed. California said that by passing this legislation they stand to collect an extra $317 million in state and local tax revenue. Small business in California believes that this will close 25,000 small businesses overnight.

Over the years, small businesses have become affiliates of Amazon and other internet companies to generate much needed income in the sluggish economy. Amazon is discontinuing the use of affiliates in California because the law stipulates that any online retailer with local affiliates would be subject to the tax. The affiliates paid California $152 million in state income taxes in 2010 alone.

Amazon creates jobs all over the United States. With the current unemployment rate, will this hurt the economy? Amazon provides an alternative to small businesses to generate revenue. Small business use many affiliate relationships to help their business. This impact could have an adverse effect on California. Amazon stand will be a topic of debate in the upcoming weeks. The news reports suggest that the government should step in. WHY?

Most states are having problems now because of the economy. Expects say that we have to create new ways of generating revenue. The collection of sales tax from Amazon will give California little help which is needed. The argument is that why internet sales should be handled any different from normal sales. The argument will go on. Amazon will not be able to pull out of all markets if other states pass the same type of legislation. Amazon should put together a strategic plan of action.