California’s Amazon Tax Spurns Online Entrepreneurs

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California’s Amazon Tax Spurns Online Entrepreneurs

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It is no secret that California is in a heap of financial trouble. With budget deficits measured in the billions of dollars, and Sacramento lawmakers still in spending mode, the state needs to find more revenue as quickly as possible. It appears the brain trust in the legislature may have uncovered what they believe is a viable source of money.

Called the "Amazon Tax", California has found a way to force retailers with no physical presence in the state to collect and pay sales tax on goods sold to California residents. This applies to any retailer, not just Amazon, that advertises on websites that are based inside the state.

Large on-line retailers such as Amazon and Overstock had threatened to end their relationships with these affiliates should the legislation become law. Now that the law has passed, on-line retailers are following through and terminating their relationships with their affiliates located in California.

This is resulting in online retailers and businesses, as well as entrepreneurs, leaving California for more tax-friendly locales. In effect, the law that was designed to collect taxes and increase state revenue has had just the opposite effect. As these businesses continue to leave the Golden State, there has actually been a reduction in tax collection.

At this point, more than 70 affiliate retailers have departed California for more business friendly states such as Nevada and Texas. Many affiliate retailers never thought such a law would pass. Now that it has, a number of those fleeing the state indicated the new law was not the only reason they decided not to do business in California.

Reasons cited included the mountain of paperwork required by the state, high taxes and equally excessive business fees. The final nail in their decision to leave, however, was the Amazon Tax.

It appears the state legislature did not believe the retailers threat to leave California was real. This is another in a long line of examples of a dysfunctional, over-spending state government chasing away business they desperately need.

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Tags: • dysfunctional • taxes • affiliate • revenue • lawmakers • sacramento • financial trouble • entrepreneurs • online entrepreneurs • amazon • california • high taxes • new law • business friendly • online retailers • sales tax • budget deficits • business friendly states • source of money • amazon tax •

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