Internet retail giant Amazon.com informed California-based Web sites, which make money via referring buyers, that they'll soon be cut out if the state forces the Amazon to pay sales tax, as proposed in the current state budget.
In a letter to affiliates, the Washington-based company warns:
"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."
In other words, if Amazon affiliates want to keep earning, they'd better figure out a way kill this pending law.
At issue is a proposed state budget measure that would force online retailers, including Amazon.com, to charge sales tax on purchases made by California residents. Thousands of Web sites in California currently are members of the Amazon Associate program, in which Web sites can earn a small amount of money if readers click-through and buy products on Amazon.
A growing number of states, eager to scoop up more tax revenue, have either already started forcing Amazon and other online retailers to charge sales tax. In retaliation, Amazon has ended affiliate programs in Hawaii, North Carolina, Colorado, Illinois, Arkansas, and Connecticut.
Scott Hauge, president of Small Business California, says he thinks it's a move by Amazon to intimidate. "Is this real or not? They've been bullies out there." He also downplays the potential loss for the Amazon affiliates. "A lot of these affiliates, this is not their livelihood. They're doing this on the side."
Meanwhile, says Hauge, brick-and-mortar stores are struggling to compete. "I get e-mails all the time from my members saying they just can't compete with a nine to 10 percent competitive disadvantage. A hardware store's profit is about 5 percent. So how can you give a competitor a 10 percent advantage in a 5 percent industry?"
We've contacted Amazon for comment on its plan to end the affiliate program. They have yet to respond.Follow us on Twitter at @TheSnitchSF and @SFWeekly.