By John Seiler

If you live in California and have been thinking of buying anything on Amazon.com, do so today or Friday. On Saturday, Sept. 15, the state imposes its sales tax — 8 percent or so depending on the county — on purchases from Amazon.com.

A year ago, Gov. Jerry Brown forced this deal on Amazon.com. According to federal law, sales tax doesn’t have to be paid by businesses located in other states. But Brown, obsessed with making us all more tax slaves than we already are, signed into law legislation imposing the tax anyway. Then he negotiated a deal with Amazon to delay the tax a year.

Amazon.com since has tried to make the best of a bad deal by building warehouses in the state. So now there’s no way to go back. The upside is that we get goods shipped to us a day or so earlier than before. I imagine most people would rather wait a day extra than pay the tax.

Local, California businesses did complain that it was unfair they had to fork over the sales tax, but Amazon.com did not. Walmart made the same complaint, lobbying for the tax. The solution there was simple: cancel the sales tax for everybody. Side benefits would have been that we would be enslaved by taxes a little less, and government would have to cut out some of its incredible waste, fraud and abuse. It still would have robbed us copiously through property and income taxes.

To avoid giving Brown more of your money for which he will only do evil, buy today and tomorrow. For Saturday the tax shackles are tightened around your wrists.

Gov. Jerry “Jobs Killer” Brown quickly is replacing departed adulterer Gov. Arnold Schwarzenegger as California’s second-worst governor. (Gov. Earl Warren always will be the state’s worst governor for stuffing loyal Japanese-Americans into concentration camps during World War II.)

The Mercury writes about how the “Amazon tax” Brown signed into law destroyed one small business — which is moving to Nevada:

It wasn’t the Great Recession that killed Nick Loper’s business. It was a flick of Jerry Brown’s wrist.

When the governor signed the state’s new online-sales tax law last month, Seattle-based Amazon and other out-of-state Web retailers immediately severed ties with thousands of California affiliates, arguing the move would put them beyond the reach of the state’s taxman. Among the victims: ShoesRUs, Loper’s comparison shopping website for shoes, confronting the Livermore entrepreneur with a life-changing reboot.

After six years of growing what started as a $200-a-month business into a profitable full-time gig, Loper said he had no choice but to shutter his site, suddenly deprived of 70 percent of the commissions he’d earned sending customers to the big retailers via click-through ads on his site.

Loper then made an argument I’ve been making for years. That California, supposedly the epicenter of Internet technology, should be the last place to increase taxes on anything to do with the Internet. It’s as dumb as Michigan favoring a $10-a-gallon new gas tax.

“I always figured that in California, home to Silicon Valley and a million tech startups, they’d never pass a law like this,” said Loper, 28, who’s moving to Nevada, which has no online sales tax, to run his newest online venture, ShoeSniper

Loper never figured that Californians would elect as governor a jobs-killing, business-hating Luddite — Jerry “Jobs Killer” Brown.

The Mercury also provided a concise explanation of what these affiliates do:

Loper’s site is fairly typical of those of affiliate marketers, who set up a website about fly-fishing, say, blog about the subject to draw readers in, then hope they click on an ad for FlyFishUsa, go to that site, and buy a fly reel, generating a commission of up to 20 percent for the affiliate.

Note that Loper doesn’t have any actual, physical stock that he ships. That means moving his business to Nevada means stuffing his laptop into a backpack and getting out of Dodge.

Goodbye, Mr. Loper. And good luck in your new state, whose great new governor, Brian Sandoval, likes businesses and jobs. Here’s what Sandoval did back in January, when Brown was scheming to destroy California businesses with higher taxes and regulations:

CARSON CITY — Moments after being sworn into office Monday, Gov. Brian Sandoval signed an executive order that he said will help show prospective businesses that Nevada is a business-friendly state.

“The key is getting people back to work,” said Sandoval as he signed an order suspending any new executive branch regulations until 2012.

Sandoval said he wants to show business owners considering Nevada that the state will not impose any additional regulations or costs that would dissuade them from moving here.

“The worse thing that could happen is raising taxes in our state,” he said.

In the meantime, he wants state agencies to review regulations and rescind those that harm businesses.

July 29, 2011

By JOHN SEILER

L.A. Times columnist Tim Rutten continues his tax obsession in “Amazon’s shameful California tax dodge.” He just has it in for Amazon.com. He makes a weird comparison:

At the turn of the last century, as the robber barons’ first gilded age lingered on, many Californians came to regard one powerful enterprise as the symbol of oppressive avarice and of big money’s corrupt appropriation of the political process.

That company was the Southern Pacific, whose railways kept a stranglehold on commerce and whose operatives dominated state government. The firm’s malevolent influence was the inspiration for one of California’s first literary classics, Frank Norris’ “The Octopus,” which — along with Upton Sinclair’s “The Jungle” — helped usher in a period of progressive reforms. 

Rutten ends his screed:

If Jeff Bezos, Amazon’s founder and chief executive, has a spare moment there in Seattle, he might go on his website and buy a copy of Norris’ “The Octopus.” (As a resident of Washington state, he’ll have to pay sales tax.) In any event, he might skip to the end of the first chapter and consider how it might feel to have Amazon regarded as the poet-narrator describes the Southern Pacific:

“The leviathan, with tentacles of steel clutching into the soil, the soulless Force, the iron-hearted Power, the monster, the Colossus, the Octopus.”

It’s a happy day when a columnist can show off his literary acumen. But as a journalist, he also should have done some research. Back before the Internet, research was difficult. You had to walk over to the newspaper library, find a reference book, such as one listing the top U.S. retailers, and Xerox the page.

Nowadays, things are much easier. It took less than a minute for me to Google “top retailers” and get this page.

It lists Amazon, for 2010, as the 19th biggest retailer in the USA, with $18.5 billion in sales. The biggest — no surprise — was Wal-Mart, at $307.7 billion.

So, Amazon.com’s sales are 1/17th those of Wal-Mart. If there’s an “Octopus” here, it obviously is Wal-Mart.

No doubt Amazon has sold more so far in 2011. It grew 40 percent in 2010, and probably is growing that fast this year. But it still would enjoy but a fraction of Wal-Mart’s sales.

The Biggest Octopus

Moreover, there are a lot bigger octopodes that even Wal-Mart. A century ago, governments still were pretty small. Americans lived in freedom.

Today, just for California, Amazon sold about $2 billion in 2010. California’s state budget now is $86 billion, or 43 times as big.

And as to Amazon’s $19.5 billion in U.S. sales last year, the U.S. federal budget now is $4 trillion — 205 times as big.

Rutten is upset that Amazon is using the initiative process, created a century ago by the progressives who battled Southern Pacific, to thwart the recent Amazon tax. (The tax actually hits 25,000 small “affiliates” a lot more than it does Amazon because Amazon and other companies fired their affiliates.) But until now, Amazon has had close to zero political involvement in California. It’s only involved because it was attacked by Rutten and crew.

Wal-Mart and Property Rights

By contrast, Wal-Mart long has been deeply involved in California politics. As a reporter, Rutten should know that.

I’ve written about Wal-Mart’s actions for years, especially during my 19 years as an editorial writer at The Orange County Register. Sometimes I have defended Wal-Mart, as when unions have thwarted its expansion plans because the company mostly is non-union.

But I’ve also attacked Wal-Mart when it has used its immense powers to manipulate local governments to abuse eminent domain and other political tricks to its advantage. My principle is simple: the same property rights for everybody. Wal-Mart should not use its clout to trample on the little guys’ property rights. But powerful unions shouldn’t revoke Wal-Mart’s property rights.

Rutten also is upset that federal laws and court decisions prevent sales taxes being grabbed across state lines, unless a company has a “nexus” — a physical location — in the taxing state. He says this means California loses $2 billion in tax revenue a year.

The number is dubious because, if inter-state sales taxation were allowed in the United States, then shipments from California to other states would be taxed more often, reducing the sales of our companies. But Rutten thinks statically, not dynamically. He’s living in a 1993, pre-Internet world.

Commerce Clause

But he should have noted that the law and court decisions are firmly grounded in the “Commerce Clause” of the U.S. Constitution, which was designed to prevent the states from erecting protectionist borders against each other. The Founding Fathers saw how Europe’s numerous small states attacked one another with protectionist barriers, and wanted to prevent similar battles here. That’s one part of the Constitution that has worked well, and has been a foundation of our national prosperity.

He also should have noted that, with Republicans in charge of the U.S. House of Representatives until at least 2015, there’s no chance they would pass a law allowing inter-state taxing of sales. And even Democrats, when they ran all of Congress from 2007-2010, didn’t dare allow that tax increase.

Moreover, the  five states with no sales tax are represented in the U.S. Senate by eight Democrats and just two Republicans. Those eight Democrats — including Sen. Max Baucas of Montana, chairman of the powerful Senate Finance Committee — would join with all 47 Republicans in the Senate to block any change in tax law that could potentially slam their states.

As to the Amazon initiative here in California, it’s not a sure thing anyway — something “Octopus” Rutten should have pointed out. Two-thirds of initiatives fail. Powerful opponents of an Amazon initiative would include Wal-Mart and other major retailers, the L.A. Times and other liberal newspapers and the state’s powerful government-worker unions — always salivating like Pavlov’s dog for more of our tax money.

On Amazon’s side is its good image and the convenient service it has provided to millions of Californians, anti-tax groups, the vast majority of those 25,000 fired affiliates who would want their livelihoods back — as well as the negative image voters have of Gov. Jerry “Jobs Killer” Brown, the greedy unions, the state Legislature and government in general.

Voters — over-taxed, over-regulated and under-employed — are in a foul mood. They’re starting to understand that government, the real deadly octopus, is not their friend, but their enemy. And that raising taxes only feeds the octopus.

Finally, Rutten says Bezos should go to the Amazon.com site and buy a copy of “The Octopus”: “As a resident of Washington state, he’ll have to pay sales tax.” That’s more defective research. Amazon.com offers a free copy, on which no sales tax is charged anywhere — for now.

What do California-based companies Adobe Systems, eBay, Electronic Arts, Oracle and Twitter have in common? All have expanded over the past two years not in the Golden State, but in neighboring Utah.

Utah Gov. Gary Herbert makes no apologies for pursuing California companies. “We are lowering taxes and making the state business friendly,” he told Forbes magazine, “while California is doing the opposite with higher taxes and regulations that are nonsensical.”

The flight of five of California’s best known tech companies is not an aberration, according to Joseph Vranich, an Irvine-based business relocation expert. Companies are “disinvesting” in California at a rate five times greater than two years ago, he estimates.

That includes companies leaving the state altogether, establishing divisions elsewhere or choosing not to set up operations within California.

“California is such fertile ground, ” Vranich relates, “that representatives for economic development agencies are visiting companies to dissect our high taxes, extreme regulatory environment and other expenses to show annual savings of between 20 and 40 percent after an out-of-state move.”

The disinvestment trend Vranich identifies has risen to a level where it has gotten the attention of high-level state officials. Indeed, Lt. Gov. Gavin Newsom, chair of the state’s Economic Development Commission, currently is developing a plan to address California’s unfriendly business climate, which he will unveil by month’s end.

“California has got to get its act together,” he said this week, “when it comes to economic development and job creation.” Toward that end, he added, the state will establish a new agency later this year devoted to those purposes.

But what can Newsom do, what can a new agency accomplish, when lawmakers in Sacramento continue to enact legislation that raises the cost of doing business in California far beyond competing states like Utah?

The ‘Amazon Tax’

Just last month, for instance, Gov. Jerry Brown signed a state budget that forces online retailers to collect California sales taxes by expanding the definition of having a physical presence within the state.

Previously, “physical presence” meant bricks and mortar. It applied to retailers with actual (rather than virtual) stores that customers could visit in some shopping center or another.

Now, if a retailer even has affiliates in the state — individuals or companies it contracts with to steer prospective customers to its web site — the Franchise Tax Board considers that a physical presence subject to taxation.

The immediate result of California’s new law is that Amazon.com, one of the nation’s leading online retailers, severed ties with thousands of affiliates it had here in the Golden State, business partners that earned commissions of as much as 15 percent of each sale they brought to Amazon.

That is but one example of the kind of laws California has added to its books that are driving California businesses to states that don’t impose the higher taxes and nonsensical regulations to which Utah Gov. Herbert referred.

Jobs Killer Bills

Even now, the California Chamber of Commerce is tracking dozens of what it refers to as “job killer” bills, proposed legislation that threatens to hurt the state’s job climate and hamper its economic recovery.

Among the job killers are measures that would mandate an automatic annual increase in the state minimum wage, authorize the state’s 58 counties and more than 1,000 school districts to impose or increase taxes on products and services (subject to voter approval), ban food vendors from using polystyrene foam food service containers and eliminate the right of businesses to appeal court orders denying or dismissing petitions to compel arbitration.

Those measures would mean higher labor costs, higher local taxes, the elimination of manufacturing jobs and more in-court cases (rather than less costly out-of-court mediation).

And while most of the several dozen bills deemed unfriendly to the state’s business community will not be enacted this year, some will. And many, if not most, of those that fail this year will be reintroduced in the Legislature next year.

All of this plays right into the hands of Gov. Herbert of Utah, and officials in such states as Arizona, Nevada, Colorado and Texas, all of which are poaching overtaxed over-regulated California businesses.

The Golden State’s loss is their gain.

— Joseph Perkins

By JOHN SEILER

Amazon.com didn’t waste time in working to repeal the so-called “Amazon” tax. The tax was passed last month by the Democratic-controlled Legislature and signed into law by Democratic Gov. Jerry Brown. The tax is supposed to raise $200 million a year.

But Republicans, in particular Board of Equalization member George Runner, pointed out that the tax would kill thousands of businesses, which then would stop paying income, sales, property and other taxes. Effectively, it’s a negative tax — destroying more revenue than it brings in.

In my article on the Amazon tax — which is what Democratic staffers in the Capitol call it, even though it also affects many more companies — I wrote about my friend Gary Metz, an Amazon affiliate. Along with 10,000 other affiliates, after the tax was imposed Amazon “fired” him. Another 15,000 affiliates were “fired” by out-of-state companies other than Amazon.

Metz just forwarded to me the letter Amazon is sending fired affiliates like him. It reads (boldface in original):

Comment on California Jobs Referendum from Paul Misener, vice president, Amazon Global Public Policy

This is a referendum on jobs and investment in California. We support this referendum against the recent sales tax legislation because, with unemployment at well over 11 percent, Californians deserve a voice and a choice about jobs, investment and the state’s economic future.

At a time when businesses are leaving California, it is important to enact policies that attract and encourage business, not drive it away. Amazon looks forward to working again with tens of thousands of small business affiliates in California that were harmed by the new law’s effect on hundreds of out-of-state retailers.

As Governor Brown has made clear, it is important to directly involve the citizens of California in key issues and we believe that Californians will want to vote to protect small business and keep jobs in the state.

Amazon’s Strategy

Amazon obviously is not a dumb company. It’s being polite toward Gov. Jerry Brown, even though he has attacked the company.

Amazon is located in Washington State, where initiatives and referendums also are common, and decide major issues. So Amazon knows how the process works — although California’s process, of course, is a little different from Washington’s.

Amazon has a ready-made anti-tax constituency: those 10,000 fired affiliates. It has their emails. It easily could get their testimonies for TV ads boosting an initiative.

Moreover, Amazon knows that the whole country, even California, is in a foul, anti-government, anti-tax mood. Governments at all levels — federal, state and local — are badly managed, have spent and borrowed way too much, and now are seeking to put the thumb screws to taxpayers once again.

It’s true that, in California in November 2010, that anti-government, anti-tax sentiment was severely diluted. The Tea Party anti-tax movement hardly made a wave here. Democrats, after the election, said California’s “firewall” stopped the Tea Partiers at the state border.

But eight months is a long time in American politics. Last November, anti-tax activists here were handicapped because the sitting Republican governor, Arnold Schwarzenegger, had increased taxes. And the Republican candidate to replace him, Meg Whitman, ran one of the worst campaigns ever.

All that’s in the past. Arnold has become an object of ridicule for treating his marriage vows as seriously as he did his vows to Californians that he never would raise taxes. His 2009 tax increases were supposed to solve the state’s perennial budget shortfall. They didn’t.

And this year, unlike in 2009 when four members defected to the pro-tax side, Republicans in the Legislature stood solid against tax increases. Where Arnold could seduce some of them to stray, Jerry Brown couldn’t.

Next Year

The Associated Press reported on Amazon’s plans for next year:

A petition for a referendum was filed Friday with the state Attorney General’s Office so that voters can decide on the requirement, which was included in a state budget signed into law in late June.

Supporters must now gather around 434,000 signatures to qualify it for the ballot, according to the state Attorney General. A vote could occur during the next statewide election in June 2012.

The big battle will be between Amazon and the big-box stores that favored the Amazon tax, especially Walmart and Target. The big-box stores say that it’s unfair for Amazon to avoid the California state sales tax, effectively giving Amazon an 8 percentage-point advantage in pricing.

But these big-box stores themselves manipulate the government. They sometimes use eminent domain and redevelopment to get sweetheart property deals. And I remember how Walmart, a decade ago, manipulated the Huntington Beach City Council to get a 75-year lease on an unused school property — which included a clause that Walmart could opt out any time it wanted, but the city and school district were locked in.

And Walmart complains when unions manipulate the government to stop new openings of Walmart stores because the company mostly is not unionized. But when it comes to using California’s government to clobber an out-of-state rival, Walmart is all for that.

Amazon’s TV ads for the initiative no doubt will feature victimized affiliates. They’ll be Mom and Pop types whose livelihoods were destroyed by Gov. Brown’s new tax.

Walmart and the other big-box stores will fund ad campaigns talking about “fairness” and how state needs the tax money to fund schools, roads, police, firemen, etc.

This is a tough one to call. About two-thirds of statewide initiatives fail in California. But I think this one likely will win because there’s been a lot of buzz on the issue. Here at CalWatchDog.com, our articles on the Amazon tax have gotten a record number of comments from readers.

Even though most people aren’t affiliates, millions of Californians do buy from Amazon, and like the company. And today’s anti-tax mood will be even stronger next year.

Finally, if Amazon really wanted to play hardball, it could start a movement to recall Gov. Brown. Put that on a June ballot with an Amazon tax cut, and the fireworks really would begin.

recall

The “Amazon” tax imposed Gov. Jerry “Jobs Killer” Brown and the Democratic Legislature, at the behest of the government unions that control them, already is killing scores of California businesses. Reports Jan Norman of the Orange County Register:

Thousands of small-business owners — not to mention schools and nonprofits — are scrambling to figure out how much revenue they’ll lose as hundreds of online retailers cancel their affiliate programs in response to California’s new Internet sales tax law.

Note that it isn’t really Amazon that’s being hurt here, even though everybody calls it the “Amazon tax,” including Democratic staffers I talked to in the Legislature. It’s the little Mom and Pop stores that are being destroyed.

Killing Charities

Also note that charities also are hurt. Your local soup kitchen might put up a link on its Web site to some products on Amazon. When folks buy those products, the soup kitchen gets an affiliate commission. Now, they won’t get that money.

So, the poor will have to depend even more on government, adding another expense to the state budget.

Norman also provides the best description I’ve seen of how things work with these little affiliates — the Mom and Pops and the charities “Jobs Killer” Brown destroyed:

Here’s how it works: Let’s say you are a California resident with a website. You don’t even sell anything online. But you sign up to be an affiliate of  a retailer and put a  link to that retailer’s e-commerce site on your own website.

If a visitor to your site clicks on that link and buys something, the retailer pays you a small commission.

If the online retailer has a physical presence in California — such as Walmart or Target, which have been supporters of the new law — it must charge California sales tax from California buyers.

But many of these online retailers have no physical presence (stores, warehouses, headquarters etc.) in California. And they have not been collecting California sales tax.

Understand that retailers don’t pay sales tax. They collect it for the state or local government entity.

So, let’s say your little Mom and Pop book review site links its reviews to the books sold on Amazon. The purchaser might be in Massachusetts. And the book bought might be shipped from Nevada. The actual physical object — the book — never even comes to California.

But because the Mom and Pop store is located in Taxifornia, and electrons pass into and out of their business computer, that’s considered a “nexus,” that is, a physical presence of Amazon — or some other store — in California. How absurd.

Norman cites a couple of victims:

Tom Messick, owner of employeemall.com in Yorba Linda, provides employee discount programs for hundreds of companies nationwide. He has affiliate relationships with 300 companies that pay him a commission when employees use their products or services, such as yoga. He estimates the revenue is about 25 percent of his business.

Amazon is not one of the companies Messick is affiliated with. But to date, 15 of these companies have terminated their affiliate programs with Messick and other California firms “and the notices are coming in on a daily basis,” he said.

Amazon wasn’t even a player in “Jobs Killer” Brown’s attack on Messick’s business.

“It’s not so much the loss of revenue,” Messick said. “What bother me is having a competitive disadvantage with companies in other states that provide employee discounts.”

SurfMyAds.com in Santa Monica will be hit even harder. The company operates an international network of shopping sites such as PromotionalCodes.com, CouponWinner.com, myShoes.com and Coupons.ca. Affiliate commissions are the company’s primary source of revenue.

“So far we have received termination notifications from just over 100 of our merchant partners,” said Alexis Caldwell, director of affiliate and partner marketing. “However, we expect this number to increase over the coming weeks as more merchants receive word from their legal teams that they must sever their ties with California affiliates.”

Ebates in San Francisco is another online shopping site that has an active affiliates program. It has received more than 60 termination notices from online retailers. “We will see what the impacts are on our business over the coming weeks,” said Ebates official Rob Smahl. “If we cannot restructure our working relationships with the retailers who terminated their affiliate programs, then we will consider all options as necessary up to moving out of state.”

Loren Bendele, CEO at Savings.com in Los Angeles, said, “Essentially this is a California small business tax, so ultimately it hurts businesses like ours. When Illinois passed this law, all the major players in our industry moved out of the state. I’m afraid this will have a similar impact on California and cause the tech industry to migrate to other states.”

‘Nexus’ Absurdity

It’s also absurd for “Jobs Killer” Brown and the Democrats and unions to believe the Amazon tax will bring in $200 million a year. It’ll easily kill that much more in tax revenue the Mom and Pops used to pay in income, sales and property taxes. But we probably won’t have real data on the cost until next year.

And keep this in mind the next time “Jobs Killer” Brown, the Democrats and the unions say we need higher taxes to help the poor. But they just killed the affiliate program money that private charities used to help the poor.

July 10, 2011

You’ve probably heard of Stockholm Syndrome, where hostage victims end up identifying with the hostage takers. Here’s Wikipedia’s definition:

In psychology, Stockholm syndrome is a term used to describe a real paradoxical psychologicalphenomenon wherein hostages express empathy and have positive feelings towards their captors; sometimes to the point of defending them. These feelings are generally considered irrational in light of the danger or risk endured by the victims, who essentially mistake a lack of abuse from their captors as an act of kindness.^[1][2] The FBI’s Hostage Barricade Database System shows that roughly 27% of victims show evidence of Stockholm syndrome.^[3

There’s also what I call “Government Stockholm Syndrome,” where victims of government abuse end up identifying with the government abusers.

That’s what’s happening with the “Amazon Tax” imposed Thursday by Gov. Jerry “Jobs Killer” Brown.

To avoid being forced to pay an unfair tax, Amazon.com “fired” its small, California affiliates, about 10,000 of them. Including other out-of-state businesses, about 25,000 California affiliates have been fired in the last two days. We’ve written about this recently here on CalWatchDog.com.

But some of the affiliates destroyed by “Jobs Killer” Brown, instead of blaming him and the rest of the government, blame Amazon! See what I mean: Government Stockholm Syndrome.

Here are a couple of these folks suffering from the Syndrome.

The L.A. Times reported:

However, another Amazon affiliate, Glenn Richards, an independent recording artist in Orange County (MightyFleissRadio.com), is angry with Amazon and its head Jeff Bezos.

“I think that Amazon.com’s decision to throw their affiliates, (including myself) under the bus is a national disgrace,” Richards said. “Jeff Bezos should be ashamed of his conduct. His bully boy practice and tactics of extinguishing small business in California should be (condemned). Small business has no power…and no hope to confront Internet giants like Amazon.com.”

The San Francisco Chronicle reported:

Former Chronicle business reporter Dan Fost is an Amazon associate. “Meaning I have an Amazon ad on my Web site, and if anyone clicks through to buy my book, I get a little share,” said Fost, author most recently of “Giants Past & Present,” about our favorite baseball team.

“I barely make anything on this, but I presume others do very well.”

Fost, who also received a notice Wednesday, said he was “intrigued that Amazon is threatening to take that away from me and other associates if the Brown tax passes.”

“I don’t see the connection at all – they’d rather not make the sales from our sites if they have to pay tax on those sales? I think they’re just trying to punish Californians for whatever the governor and Legislature do.”

July 1, 2011

Note: If you were fired as an Amazon affiliate, please email me your story to be included in a future article: writejohnseiler@gmail.com

JULY 1, 2011

By JOHN SEILER

“I was fired today,” my friend Gary Metz wrote me just after Amazon.com notified him on Thursday of the action. Amazon fired him right after Gov. Jerry Brown signed into law the new “Amazon tax,” as it was widely referred to on Capitol Hill, although it affects other companies as well.

Metz’s main job is as a network engineer in Southern California, “helping people with Websites and businesses.” But for several years now he has supplemented his income by about $100 a month through Amazon.

“For me, it was additional income,” Metz told me. “So it wasn’t that big a deal personally. For anybody who is making a living on the Internet, and there are a growing number of people in California who are dong that, this is disastrous. If you want to put those people out of work, too, that’ll do it.”

Metz said he operated a Website and blog on foreign policy, Regime Change in Iran. If you check out the site, you’ll notice that on the right side he lists some foreign policy books. If someone clicked on one and bought it through Amazon, he would get a portion of the sale.

“It was nice additional income,” Metz said. “There are probably thousands of people in California for whom it’s important supplemental income. And for other people, this is how they make their living. For those people, this will force them to either act like they’re in another state somehow, or actualy physically move.”

Or go broke, go in welfare and apply for food stamps and Medi-Cal, thus costing the taxpayers money, whereas before they were taxpayers themselves.

“These kinds of laws will destroy one of the few areas where our economy is growing and is strong,” Metz observed. “So they make a few dollars on some taxes. At the same time they drive the businesses out of business. They destroy the means to make money, which would be spent in the local economy.”

I hope the Legislative Analyst does a study of the Amazon tax. Because it’s clearly a negative tax — it reduces taxes at a higher rate than it collects them. The businesses destroyed will not be paying income, sales and property taxes in California. That amount will be more than that “collected” under the new tax.

Destroying businesses is insane in a state still suffering 11.7 percent unemployment. But, alas, par for the course under Gov. Jerry “Jobs Killer” Brown.

Businesses Destroyed

Katy Grimes’ article on CalWatchDog.com, “Brown Signs Punitive Amazon Tax,” also has drawn comments from Californians whose livelihoods he has destroyed with the stroke of a blood-filled pen.

These are all the “little people,” the Mom and Pop businesses that keep the state going. But Jerry “Jobs Killer” Brown doesn’t care about them. Bill Clinton used to say, “I feel your pain.”

Jerry Brown screams: “I inflict your pain.”

Soquel by the Creek wrote:

I’m a fourth-generation native Californian, a former Amazon Affiliate, and I fully support Amazon’s position in the matter. Amazon did far more for my small business than the state of California ever has, especially for the privilege of spending an additional $800 annually on California corporate taxes.

I fully expect that the California law will eventually end up in the Supreme Court, at taxpayer expense our course. Only the United States Congress has the authority to regulate interstate commerce, not the California Legislature.

The state will never collect their projected revenues from this flawed policy.

For anyone in the “producing class”, California is a high tax state already. California ranks near the bottom on general business climate and in business tax climate. It should come as no surprise that California also enjoys the nation’s 2nd highest unemployment rate.

Casey wrote:

By the time I gave up for the night, I was down by 94 merchants, one of which was Amazon. I don’t blame Amazon or any of my out-of-state merchants for the decision to distance themselves from us here in California.

I’ve said this elsewhere and I’ll say it here: These tax nexus laws make as much sense as removing a car engine to improve gas mileage. Yes, the mileage will be vastly improved (on paper) but you’re not going to get very far very fast.

I want my engine back.

Rexanne wrote:

I was born and have lived in Southern California most of my life. This law has just destroyed my small business that is the only means of support for myself and 2 children and one that has taken me 12 years to build into a viable means of income.

The state of California will not see ANY money from this law. Merchants are simply dropping their CA affiliates so there is no “nexus” (presumption of physical location) and they will therefore not have to pay this unconstitutional interstate tax (taxation without representation).

The budget that Gerry Brown signed is in no way “balanced” and those who created it and stuffed it on the CA people (including Governor Brown who signed and validated it) are now getting their paychecks again. Meanwhile 25 thousand CA businesses are suffering and losing money that would be taxed and spent in the state.

This is not only a blow to California affiliate marketers but a blow to the people of California.

Amy wrote:

I didn’t spend today being productive. Instead we read 100s of e-mails from stores around the country. They are terminating their relationships with us. We had to figure out how to deal with the situation.

When we discovered that most of them made the terminations effective immediately, we had to scramble to get them off of our sites. It’s almost 9pm and we are not done.

I expect that there will be more tomorrow and that they will trickle in through next week.

We won’t be generating income from these stores anymore. Someone in another state will and that state will collect income tax. California won’t get the income tax from those sales.

Oh, and California won’t be receiving sales tax collections from these stores either. Just lost income for the state and its residents.

If you think that people should pay sales tax on what they buy no matter where they buy it, you’re right. That’s the law. Unfortunately this bill won’t make that happen and just hurts businesses like mine.

Amy added later:

And in case anyone thinks that we are going to any satisfaction by being able to say “I told you so” to the legislators and governor, it won’t. It still sucks that we have to go through this even though we knew that our businesses would be devastated by the passage of this law and spent over TWO YEARS telling the legislators and their staffs exactly what would happen.

Today is the day, ladies and gentlemen of the California State Legislature… you ordered this up. Where is your $150 million that the lobbyists for the unions and big box stores promised? Oh yeah, you trusted Walmart when its lobbyist told you that this was about Main Street fairness. Did you bother to see what Walmart did to Main Streets across the country?!?

It’s not too late to repeal this bill. Once our businesses move out of state or close, then it’s too late.

If you want to see what it looks like when affiliate publishers move states, watch this video:http://www.youtube.com/watch?v=ckP0HWl_w3c

Amy again:

It’s almost midnight and I’m not done yet but I can’t look at this screen anymore. It’s just too depressing. The dead stores on our sites will have to stay there a little longer.

With the economy down, is there anything else that the California Legislature wants to put in the way of our small business having any chance of success? Isn’t California where the tech revolution is supposed to be? Shouldn’t our governement be HELPING, not HURTING internet startups?

The state will collect more from the success of Facebook, LinkedIn, Pandora, Twitter, etc. than it could ever hope for from this bill. How about some perspective people?!? HELP the people who are generating income tax revenue and jobs!!!

Amy’s final word:

One last thing that I just noticed… we lost partnerships today that we have had for TEN YEARS!!! We have had good working relationships with many of these companies and worked closely with them.

This is so sad.

Here’s the YouTube Amy linked to, about affiliates leaving Illinois after it imposed an “Amazon tax”:

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Amazon Firing Letter

And here’s the letter Amazon sent to Gary Metz and other affiliates:

Hello,

Unfortunately, Governor Brown has signed into law the bill that we emailed you about earlier today. As a result of this, contracts with all California residents participating in the Amazon Associates Program are terminated effective today, June 29, 2011. Those California residents will no longer receive advertising fees for sales referred to Amazon.com, Endless.com, MYHABIT.COM or SmallParts.com. Please be assured that all qualifying advertising fees earned before today will be processed and paid in full in accordance with the regular payment schedule.

You are receiving this email because our records indicate that you are a resident of California. If you are not currently a resident of California, or if you are relocating to another state in the near future, you can manage the details of your Associates account here. And if you relocate to another state in the near future please contact us for reinstatement into the Amazon Associates Program.

To avoid confusion, we would like to clarify that this development will only impact our ability to offer the Associates Program to California residents and will not affect your ability to purchase from Amazon.com, Endless.com, MYHABIT.COM or SmallParts.com.

We have enjoyed working with you and other California-based participants in the Amazon Associates Program and, if this situation is rectified, would very much welcome the opportunity to re-open our Associates Program to California residents. As mentioned before, we are continuing to work on alternative ways to help California residents monetize their websites and we will be sure to contact you when these become available.

Regards,

The Amazon Associates Team

Update, 6:13 pm, June 29, 2011: Gov. Jerry “Kill Businesses” Brown just signed this jobs-killing bill. It also slams Internet commerce globally, something anyone in California should oppose because of our huge Internet companies. Brown fashions himself a hip, with-it, high-tech kind of guy. He’s really a Luddite — an opponent of technological progress. Message to all California businesses: Drop dead.

Another L.A. Times article reported on one affiliate who’s already leaving:

Many of about 25,000 affiliates in California, especially larger ones with dozens of employees, are likely to leave the state, said Rebecca Madigan, executive director of trade group Performance Marketing Assn. The affiliates combined paid $152 million in state income taxes last year, she pointed out.

That’s what Ken Rockwell of San Diego, the owner of a 12-year-old photography website, said he planned to do.

“Will it be Las Vegas or Scottsdale or Ensenada?” he said. “It’s a question of where, not if.”

(Earlier post begins here:)

It didn’t take Amazon.com long to warn is California “affiliates” that soon all could be fired because of the venal actions of the state’s union-owned Legislature.  These affiliates, about 20,000 of them, mostly are small Mom and Pop outfits that use Amazon’s selling and marketing system. If you bought a used book or CD or DVD online, you probably bought through an affiliate.

This isn’t Amazon’s fault. It’s the fault of an out-of-control Democratic Legislature that hates businesses — and especially hates small businesses. It’s a Democratic Legislature that is owned by the government-worker unions that feed, like locusts, on the productive dues of their members, which in turn are funded by tax dollars.

The matter isn’t entirely over because court challenges, or some other unforeseen action, could cancel the tax. The tax is expected to collect some $200 million. But how can the tax be collected if all the affiliates are fired — and either go on unemployment and food stamps, or leave the state?

Our reporter Katy Grimes found the letter Amazon is sending out its affiliates:

Hello,

For well over a decade, the Amazon Associates Program has worked with thousands of California residents. Unfortunately, a potential new law that may be signed by Governor Brown compels us to terminate this program for California-based participants. It specifically imposes the collection of taxes from consumers on sales by online retailers – including but not limited tothose referred by California-based marketing affiliates like you — even if those retailers have nophysical presence in the state.

We oppose this bill because it is unconstitutional and counterproductive. It is supported by big-box retailers, most of which are based outside California, that seek to harm the affiliate advertising programs of their competitors. Similar legislation in other states has led to job andincome losses, and little, if any, new tax revenue. We deeply regret that we must take this action.

As a result, we will terminate contracts with all California residents that are participants in theAmazon Associates Program as of the date (if any) that the California law becomes effective. Wewill send a follow-up notice to you confirming the termination date if the California law isenacted. In the event that the California law does not become effective before September 30,2011, we withdraw this notice. As of the termination date, California residents will no longerreceive advertising fees for sales referred to Amazon.com, Endless.com, MYHABIT.COM or SmallParts.com. Please be assured that all qualifying advertising fees earned on or before thetermination date will be processed and paid in full in accordance with the regular paymentschedule.

You are receiving this email because our records indicate that you are a resident of California. If you are not currently a resident of California, or if you are relocating to another state in the nearfuture, you can manage the details of your Associates accounthere. And if you relocate toanother state in the near future pleasecontact usfor reinstatement into the Amazon AssociatesProgram.

To avoid confusion, we would like to clarify that this development will only impact our ability tooffer the Associates Program to California residents and will not affect their ability to purchase from Amazon.com, Endless.com, MYHABIT.COM or SmallParts.com.

We have enjoyed working with you and other California-based participants in the AmazonAssociates Program and, if this situation is rectified, would very much welcome the opportunityto re-open our Associates Program to California residents. We are also working on alternativeways to help California residents monetize their websites and we will be sure to contact youwhen these become available.

Regards,

The Amazon Associates Team

June 29, 2011

I’ve been writing about the suicidal idea for California to tax Internet sales. In a comment to that post, a small business operator wrote how it would kill his business, and others like it. I thought it worth reprinting here on the blog. This shows what’s really going on in California.

Contrast its realism with the fantasies dreamed up in the union-dominated Legislature or the hothouses of such think tanks as the California Budget Project, whose lobbying for such a tax I reported on here.

Here’s what the small businessman wrote:

I can speak from personal experience on this issue, because I’m one of those small fry affiliates desperately trying to scratch out a living from Amazon’s affiliate program (and others). I was laid off in 2009, haven’t been able to find a new job since, and have no realistic expectation that I will find a new one any time soon, given California has the 2nd highest unemployment rate in the nation. I’ve been working every day, often 15 hour days, creating blog pages to try to get to the point where I can at least cover my monthly expenses. At this point, affiliate marketing is my only realistic hope of keeping off the welfare rolls and out of food banks. If any of these bills go into law, Amazon, Overstock, and other affiliate programs will dump me, and then I don’t know what I will do. The rich affiliates will move out of state, taking their jobs, personal income, etc. with them, I don’t have that option.

I can tell you from personal experience, switching over to new vendors would require re-doing the months worth of work I’ve already done. I would get ZERO future income from hundreds or even thousands of hours worth of work I’ve already done, and switching everything over would prevent me from doing hundreds of hours worth of work that I could do as I end up having to spend that time re-doing work I’ve already done. Anyone who thinks you can just flick a switch and change everything over doesn’t understand how affiliate marketing works.

As for Barnes & Nobles offer to pick up some of the dumped affiliates, note the word “some”. The beauty of Amazon’s affiliate program is that anyone, anyone, with a website, no matter what their traffic, no matter if they have no prior affiliate experience, no matter how small their website, can join the Amazon Associates Program and start in affiliate marketing. You don’t have to have a fully completed website, you don’t have to have a minimum traffic level, you aren’t scrutinized by some affiliate manager, you can just join and start working. It doesn’t matter how small you are, how poorly you perform in the beginning, you can still join, participate, and work towards bigger and more profitable times. That’s a large part of WHY amazon became as big as they did, their open door policy towards all affiliate marketers.

Not so with Barnes & Noble. I’m sure they’ll be glad to scoop up the top performers, well, the ones who don’t relocate out of state, that is, but they won’t be interested in the small fry. I applied to their affiliate program and was rejected, and I’m sure I’d be rejected today too. They’re far less attractive than Amazon in any event, Amazon has a better site, better prices, better range of products (its not just books, folks) and I’m sure better conversion rates. There’s a reason why Amazon is the biggest online retailer.

If these bills pass in California, I’ll essentially be killed as an affiliate marketer, unless I can get an out of state friend let me come and live on their couch. California still won’t get any sales tax from Amazon, Overstock, etc., the rich affiliates will take their jobs and their income out of the state, and I’ll either be forced into going onto welfare and begging my way out of the state so I don’t lose thousands of hours invested into my affiliate sites. That’s the reality.

May 9, 2011