The Other McCain

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Amazon Goes Galt, Cuts Off California to Avoid Internet Tax in Zimbabwe, U.S.A.

Posted on | June 30, 2011 | 38 Comments

It was in February 2009 that I first compared the situation in California to Mugabe’s bankrupt kleptocracy. And the situation is only getting worse:

Gov. Jerry Brown has signed into law California’s tax on Internet sales through affiliate advertising which will immediately cut small-business website revenue 20% to 30%, experts say.
The bill, AB 28X, takes effect immediately. The state Board of Equalization says the tax will raise $200 million a year, but critics claim it will raise nothing because online retailers will end their affiliate programs rather than collect the tax.
Amazon has already emailed its termination of its affiliate advertising program with 25,000 websites.

In essence, Amazon has “gone Galt” rather than submit to California’s Internet tax. The immediate victims? California bloggers like Donald Douglas at American Power.

For the benefit of anyone too stupid to understand why the California Internet tax is a bad idea: All the revenue from sales commissions to California’s 25,000 Web site operators who had participated in the Amazon Associates program was taxable as income.

Now? Zero income. And also zero sales.

Ergo, nothing to tax.

It is astonishing to see how California, where venture capitalists once made Silicon Valley the world capital of technological innovation, has now turned anti-capitalism, anti-technology and anti-innovation, driving the world’s largest Internet retailer out of America’s most populous state.

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Category: Amazon, California, Taxes

Comments

  • JeffS

    This is the same state that elected Jerry Brown as governor.  TWICE.

    ‘Nuff said.

  • Joe

    Even though they follow a similar lunatic beat, Oregon and Washington love giving the finger to California. 

  • Liz

    Corporatist gangsterism, pure and simple. The big companies find ways to avoid it – I’m not begrudging them, but that’s a simple fact – and the small and medium guys end up paying the price.

  • Liz

    And the consumers pay the price as well, obviously.

    And the fallout from govt interference always seems to be a clarion call for…more govt interference.

  • http://thepagantemple.blogspot.com/ ThePaganTemple

    I wonder how long it will be before the Commerce Department files a lawsuit against Amazon.

  • http://twitter.com/utroukx kerry

    don’t give them ideas!

  • http://jackt123.blogspot.com/ Jack

    This is yet another example of stupid greedy Democrats again taking a hatchet to the neck of the Golden Goose. I look at pictures of Detroit and it makes me wonder how they can be so incredibly stupid over and over and over. You know, at some point, the passing of ever more economically destructive laws is not just stupidity anymore. It’s either outright insanity or it’s deliberate evil.

  • http://thecampofthesaints.org Bob Belvedere

    Why can’t it be both???

  • http://www.pohdiaries.com/ TWB

    Yep. Happened here in NC too. The Democrats in the legislature got greedy, passed similar legislation, and it wasn’t long, I mean a matter of days, until I received an email from Amazon telling me that I was no longer a part of their associates program.

  • AR

    I’m tempted to go on a spending spree on Amazon just to show my support.

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  • Anonymous

    I wonder how many bloggers this pushes over the edge?

  • http://twitter.com/SlinkyBewmont Boiler Room Worker

    Fingers crossed….

  • http://thecampofthesaints.org Bob Belvedere

    Is there someway Amazon could set-up an offshore corporation under a different name…I don’t know…. 

    While I am cheered by Amazon’s action, it’s going to hurt people like Donald Douglas.

  • http://saberpoint.blogspot.com Stogie Chomper

    I received the same notice from Amazon.  California Democrats never saw anything they didn’t desire to tax out of existence.  No wonder California has such a moribund economy.  Golden Goose not laying those eggs fast enough?  Whip it with a bullwhip until it is dead.

  • JeffS

    We’uns here in Washington learned one lesson from Dorkifornia: no professional state legislators.  That’s helped quite a bit.  Oregon appears to have been infected at the genetic level, at least on the west side of the Cascades.

    Thus, I think that we should create two new states, both running from Canada to California/Nevada, but split along the Cascades. 

    I haven’t figured out a name for the east side of the Cascades, but the west side could be the State of Idiocy, or maybe the State of Confusion. 

    YMMV.

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  • Svt1999

    We have Fox News’ Glenn Beck’s final show posted now on Common Cents.  It is an awesome show!!

    http://www.commoncts.blogspot.com

  • http://twitter.com/irishspy Phineas Fahrquar

    Even worse: we’ve now elected Gov. Moonbeam three times. Argh.

  • http://twitter.com/RickMoore Rick Moore

    Actually three times (he served two terms in the 70′s). My fellow Californians have struck out.

  • JeffS

    True, but I was thinking that they threw him out, and then brought him back.   It’s like signing a new contract with a known loser of a quarterback.  WTF?

  • Anonymous

    Simple math. To decrease an activity, tax it. To increase an activity, subsidize it.

  • http://twitter.com/SumErgoMonstro The Monster

    I had a similar thought.  If Amazon is paying an “affiliate” that isn’t in CA ,which in turn pays its affiliate that is in CA, problem solved.

  • Anonymous

    You guys were better off when the Emperor Norton was in charge. Too bad there’s no pretenders to his throne.

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  • http://profiles.yahoo.com/u/EU5DQWQTTHTPO4A4ZYSL3AAV2U Adjoran

    I’ve seen a couple of bloggers actually blame Amazon for dropping their affiliation!

    It’s as if to preserve the little extra business they draw (most people who click through a website are doing so specifically to support the site, they could and will go to the retailer site directly), Amazon and others should incur the huge costs of collecting state taxes.  Ridiculous.

    The whole thing is a scam to give the big box retailers a competitive edge – they can already offer free shipping on anything they “ship to store,” now the online sellers won’t even have the compensating edge of no sales tax collection.

    California government is so stupid it won’t take The Big One – they’re going to drive the state into the sea themselves!

  • ed

    Actually it is a lot worse than that.

    While normal sales tax is accumulated from sales occurring within a state by consumers -in that state- this nonsense covers consumers who can be from all over the USA or the world but who happen to be supporting a website operator who resides in California.

    E.g. the assumptions about how much sales tax California is “losing” is vastly inflated because most of the people buying those products have nothing to do with California itself.

    Never underestimate the ability of politicians to ignore the obvious.

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  • http://thepagantemple.blogspot.com/ ThePaganTemple

    And if you want to let the market work in a way that doesn’t distort it, do neither.

  • Anonymous

    Correct. I absolutely agree with you 100%.  GVMT (four letter word) has to get OUT OF THE WAY and let the free market do what it does best.  It must stop doing one or the other.

    “Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”

    Ronald Reagan

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  • http://pulse.yahoo.com/_ZXSTMQGV2P3BFSD54XL7KEJF74 Ryan
  • http://twitter.com/Beregond Beregond

    What makes California’s action doubly stupid is that anyone who did even a LITTLE research would know this was going to happen. It already happened in Colorado, Illinois, North Carolina, Rhode Island, and Connecticut. As you noted, it meant the loss of taxable income, and thus a net loss of revenue. (This is not theory; I live in North Carolina.)

    California’s action can only be explained by willful blindness, antipathy to business, or both.

  • ConsrvCowboy

    Amazon did this in Colorado last year after our idiot governor, Bill Ritter, and the Dems pulled some similar crap. So much for making money with Amazon Associates…

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