Giant online retailer Amazon.com has ended its relationship with some 10,000 internet business partners while Overstock also severed a couple hundred business relationship in California, in order to avoid state taxes that Gov. Jerry Brown signed.
The bill requires out-of-state online sellers to collect sales tax on purchases from California customers, and is estimated to bring in an annual revenue of $317 million.
The state's tax officials have started to send out notices of the new tax law to out-of-state Internet retailers.
Amazon does not intend to comply with the new state law, and therefore canceled the contracts.
According to Amazon's vice president of global public policy Paul Misener, This legislation is counterproductive and will not cause our retail business to collect sales tax for the state.
Overstock.com does not expect the termination of hundreds of California affiliates to affect its business.
That effect may be small, as we have observed in these instances that the ad business terminated goes to advertisers in other states and the ad traffic to our site continues, Overstock released in a statement. It is unfortunate that the bill targeted California business, but we believe the law is unconstitutional and necessitated this decision. There will be no other changes to the way we do business.
New York passed a similar law in 2008, which Amazon has challenged in court.
But in states such as Arkansas, Connecticut, Illinois, North Carolina and Rhode Island which implemented similar tax laws, Amazon also dropped business partners.