Ama­zon to Re-Em­brace Cal­i­for­nia - A New Chance for Af­fil­i­ate Marketers?

To­day’s news is hope­fully good news for af­fil­i­ate mar­keters, es­pe­cially those pro­mot­ing Amazon.com.

Af­ter a long and heated dis­pute re­gard­ing the sales tax, Ama­zon and the State of Cal­i­for­nia seem to be com­ing to a treaty. This treaty, if im­ple­mented, is con­ceived to be a win-win so­lu­tion that will ben­e­fit both Ama­zon and YOU, if you are a res­i­dent of or one of this Amazon’s af­fil­i­ates in California.

Sales Tax Controversy

Be­fore we go and find out what agree­ment Ama­zon and Cal­i­for­nia is com­ing down with, let’s first take a look at what they have been through to reach the agreement…

The sales tax con­tro­versy started in 2010, when Cal­i­for­nia law­mak­ers be­gan to eye gi­ant re­tail­ers who don’t have phys­i­cal stores in their state but are earn­ing mil­lions, or even bil­lions, of dol­lars each year. While on­line deal­ers such as Ama­zon are pro­tected by the 1992 Supreme Court rul­ing that says busi­nesses are not obliged to pay sales taxes if they don’t have a phys­i­cal store, head­quar­ters, or ware­house of any kind within the state, law­mak­ers saw a loop­hole in it, es­pe­cially when they found the pos­si­bil­ity of rak­ing in $150 mil­lion from the com­pany annually.

The idea was that, al­though Ama­zon (and other on­line shops) might not have a phys­i­cal pres­ence in a state, they might have af­fil­i­ates in the state. Thus those af­fil­i­ates would be rec­og­nized as phys­i­cal pres­ence and sales tax could be collected.

With a hun­dred mil­lion on the line, the gov­ern­ment made a strong stance to get the tax due. Ama­zon, how­ever, does not agree and chose to im­me­di­ately cut ties with its Cal­i­­for­­nia-based af­fil­i­ates last June. There were no no­ti­fi­ca­tions made be­fore­hand; af­fil­i­ates just found them­selves aban­doned by the company.

To make up for this, Ama­zon made a pro­posal. The pro­posal ba­si­cally states that if the Cal­i­for­nia gov­ern­ment holds on the im­ple­men­ta­tion of the tax col­lec­tion un­til next year, Ama­zon will not only be pay­ing taxes but will also have dis­tri­b­u­tion cen­ters con­structed in the state and will em­ploy more than 1000 work­ers in the process. While the gov­ern­ment claims that it will never agree to such a deal, an in­for­ma­tion leak re­veals that the said treaty is al­ready well underway.

Ama­­zon-Cal­i­­for­­nia Treaty

Just to fur­ther em­pha­size, the agree­ment that Ama­zon and Cal­i­for­nia is sup­pos­edly work­ing on in­cludes the fol­low­ing provisions:

  • The gov­ern­ment will not col­lect sales taxes from Ama­zon un­til Sep­tem­ber 2012
  • Ama­zon will forego a part of its rev­enue, amount­ing to $200 million
  • Ama­zon will re-open its line of com­mu­ni­ca­tion and trans­ac­tion with its Cal­i­­for­­nia-based affiliates

One thing worth not­ing, how­ever, is that the bill that will make all these pos­si­ble is still be­ing processed, wait­ing for the sig­na­ture of Gov. Jerry Brown. Un­til it is signed, none of the above con­di­tions can or will be fulfilled.

Na­tional Intervention

One ques­tion is con­tin­u­ously bug­ging crit­ics and fol­low­ers of the Ama­­zon-Cal­i­­for­­nia dis­pute. That is: Why does Ama­zon seems so giv­ing when it comes to fore­go­ing part of its cov­eted ad­van­tage (sell­ing with­out pay­ing tax)?

The an­swer prob­a­bly lies in the fact that the fed­eral gov­ern­ment may take on this case if it be­comes a strong na­tional con­cern. If the fed­eral gov­ern­ment does take on this case, a na­tion­wide em­ploy­ment or con­sol­i­da­tion of sales taxes will prob­a­bly be im­ple­mented, tak­ing prece­dent over the Cal­i­for­nia bill and re­liev­ing Ama­zon of its oblig­a­tion to pay sep­a­rate taxes—certainly the end re­sult Ama­zon is bet­ting on.

Right now, it is still un­known whether Ama­zon will end up pay­ing sep­a­rate taxes or if it will ben­e­fit from sales tax con­sol­i­da­tion. Nev­er­the­less, re­gard­less of the re­sult, Cal­i­for­nia af­fil­i­ates, as well af­fil­i­ates from states Ama­zon for­merly cut ties with, will prob­a­bly get an­other chance at mak­ing money through this com­mer­cial giant.