Online retail giant Amazon has been forced to lock out over 10,000 members of its Amazon Associates program due to a new tax signed in by California Governor Jerry Brown. Governor Brown, who took over from Arnold Schwarzenegger in January this year, has served as Governor twice before. The new, controversial tax is aimed at non-resident retail corporations, like Amazon, and is levied on online purchases made by California residents.
Shutting down the Associates program in California is bound to have serious repercussions that will extend far beyond The Golden State. The first to be hit will be third party retailers who leverage Amazon’s immense ecommerce infrastructure to sell products of their own. Also affected will be affiliate marketers, those who promote products on Amazon’s behalf, making commissions off sales. For some this is an excellent way to make additional income, especially during these tough times. For others it’s a full-time job and many influential internet marketers are, understandably, up in arms.
Unless they manage to help repeal it, Amazon stands to loose huge amounts of affiliate-generated income. It would also be forced to pay additional sales taxes on all transactions originating from within the state of California.
This is not the first time the so-called “Amazon tax” has reared its head. The states of New Yoke, Illinois, Connecticut, Rhode Island and Arkansas have all passed similar laws. As a result Amazon shut down its Associate programs in all states but New York, where it has mounted a legal challenge.
Levying a tax specifically against internet-based income and internet companies in general, truly the one industry where America is still dominant, is a bad move both economically and politically. Doing so in California, however, seems just downright irresponsible – stupid even. Yes, California is in financial trouble, more so than many other states, but that trouble can hardly be alleviated by crippling online business. From a political standpoint Governor Brown is doing himself no favours by alienating Silicon Valley, especially after only a few months in office.
The tax isn’t just an “Amazon tax”, it theoretically affects many other internet giants also. Many of the big-name companies are already based in the state, most notably Google and Facebook, and whilst some might argue Amazon’s loss could well be theirs gain they forget that internet marketing is all about interconnectedness with advertising on one platform often driving sales on another. The removal of one player from the equation, even one they may be directly competing with in other areas, will no doubt have a significant impact on their bottom line. As a result many in Silicon Valley are no doubt watching this latest development very closely.
Should the government get off Amazon’s back or are they right to demand that large corporations like Amazon pay more taxes? Is this a good thing or a bad thing for California? Does Governor Brown “get” the internet? Can he succeed in balancing the books where so many before him have failed? We want to know what you think!
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