Misguided Law

From what I can tell of the law, Senator Hancock has it wrong. Amazon still won't have to collect sales tax on sales it directly makes to California residents, only on sales that came about through a referral from an affiliate who resides in California. For example, let's say I post an Amazon ad for a DVD on my web site (and I reside in Los Angeles, California). Someone from Arkansas clicks on my ad, which leads her to Amazon, where she buys the DVD. According to this new law, Amazon would have to collect California sales tax, and more specifically, Los Angeles sales tax, which is 9.75%, as opposed to 8.75% in San Diego. Whereas if she went directly to Amazon and bought it (or went in through an affiliate ad on a site not in California), she wouldn't have to pay any sales tax at all. Affiliate marketing would pretty much dry up in California once everyone finds out that they can save on sales tax by going directly to the site. The non-payment of sales tax by out-of-state businesses has been going on even before e-Commerce. Out-of-state mail order businesses never collected sales tax.

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