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Tuesday
Oct042011

Amazon Reinstates California Associates

On Monday, October 3, 2011, Amazon.com sent an e-mail to thousands of their Californa Associates to inform them they may now re-enroll in the Amazon Associate Program.  Amazon had terminated their relationship with the California-based Associates on June 29 after Callifornia lawmakers passed new legislation that required Amazon to collect state sales tax on purchases made by California residents.  More recently, Amazon had reached an agreement with California lawmakers and Governor Jerry Brown whereby Amazon would be allowed to delay the collection of state sales tax until September 2012.  Amazon has also agreed to built several distribution facilities in California.

In Monday's e-mail to its Californa Associates, Amazon provided a link to allow the Associates to quickly re-enroll using their original Associate IDs.  Unfortunately, Amazon will not be giving California Associates credit for referrals their sites have generated between the end of June and October 3.

In the meantime, Amazon has agreed to lobby the federal legislature for a national policy on the collection of state sales tax.  Some have incorrectly assumed this will be some form of federal sales tax.  In reality, Amazon will be lobbying for the adoption of the Main Street Fairness Act which deals with leveling the playing field among participating states on how state sales taxes are collected.

Sponsored by Senator Dick Durbin and introduced in August 2011, the Main Street Fairness Act would allow states, provided they have met certain conditions, to require large internet and mail-order retailers to collect state and local sales taxes. 

To exercise this authority, a state must sign on to the Streamlined Sales and Use Tax Agreement (SSUTA) and adopt legislation implementing its provisions. This multistate agreement requires states to, among other things, adhere to uniform product definitions, adopt uniform requirements for filing sales tax returns, administer both state and local sales tax collection through a single state office, and allow retailers to register through a centralized, one-stop multistate registration system.

If the federal legislature is unable to pass the Main Street Fairness Act by July of 2012 Amazon will be required to start collecting sales tax on California residents' purchases in September 2012.  If the Main Street Fairness Act becomes law by July 2012 then the federal law will become the guiding document regarding the collection of state sales tax by retailers such as Amazon.

Some California Associates have expressed concern that Amazon will again terminate their relationship once September 2012 rolls around.  Those fears are unfounded.  Amazon originallly terminated those Associate relationships to eliminate the indirect business presence (a "nexus") Amazon had in the state.  Under the new agreement with California, Amazon has agreed to build the aforementioned distribution facilities in California. Once the first distribution facility opens Amazon would have a direct business presence in the state.  At that point, terminating their relationships with California Associates would not gain them anything with regard to the collection of state sales tax.