California Forced Amazon to Stop Advertising Here
Today, Amazon terminated its advertising relationship with LessonIndex.com, because the State of California forced it to do so. California just blocked 26% of my advertising revenue.
California Governor Jerry Brown today signed a set of budget bills which include at least $4 billion in “smoke and mirrors” revenue. This includes $195 million falsely listed as “estimated revenue” from enactment of an “advertising nexus” law, which uses advertising on California web sites as a “hook” to force out-of-state advertisers to collect California sales tax on purchases by Californians.
I agree with the concept — Amazon and other out-of-state retailers should collect California sales tax — but I also know that this law is unwise, ineffective, and unconstitutional:
- It’s unwise because it forces hundreds of out-of-state retailers to end their advertising on California web sites;
- it’s ineffective because it won’t collect any new sales tax revenue; and
- it’s unconstitutional because it directly contradicts a U.S. Supreme Court ruling (Quill) invalidating similar laws.
As each state enacts this law, Amazon and hundreds of other out-of-state retailers terminate all performance-based advertising relationships with in-state web publishers. Amazon told California legislators that it would do the same in California. Today, Amazon did exactly what it promised, terminating its advertising relationships with 25,000 California web publishers. Amazon will now pay those advertising dollars to publishers in other states and countries.
I’m now re-generating all 2,030 pages of the LessonIndex.com web site to reflect the loss of Amazon’s paid advertising.
I was on TV last night (http://www.ktvu.com/news/28403271/detail.html), talking about the “Amazon tax” (which actually isn’t an Amazon tax). Note that the text article on that page is NOT the same as the video clip, and you’ll need to wait through a 15-second commercial before seeing the actual clip from the KTVU-2 Ten O’Clock News (2 minutes, 15 seconds).
I sure wish I’d gone for a haircut earlier this week.
Re-viewing the video, and seeing my “five-o-clock shadow,” I also wish that I’d shaved again, just before the TV crew arrived at 6pm. I suppose I also wish I were 30 years younger, 30 pounds lighter, and didn’t have a bald spot — but I’ll try to focus on the things I can change. 😉
Today, someone attempted to post on both of my blogs, falsely claiming to have a “fix” that would allow California web publishers to be reinstated by Amazon.
It’s a scam. Don’t respond to these crooks.
Shortly after Amazon’s termination, I added links to BookCloseouts.com (a Canadian company), but less than 24 hours later, I received a termination notice, advising that they also could no longer advertise on California web sites.
On Friday, September 23, Gov. Brown signed AB 155, which repealed the “Amazon tax” law and re-enacted it with an effective date of September 2012. Amazon has indicated that it will re-establish advertising relationships with California publishers soon.
Amazon notified California web publishers that they could request “reinstatement” starting today. I clicked on the link, agreed to the terms, and my site was immediately reinstated in Amazon’s performance-based advertising program.
On Google+, someone asked how other states which enacted their own “Amazon Tax” laws could join this opportunity. My reply:
News reports claimed that Amazon negotiated an agreement with state legislators. To my knowledge, Amazon has never publicly acknowledged any such agreement (it did acknowledge an earlier proposal which state legislators and the governor rejected).
Under this alleged deal, the legislature agreed to repeal the “Advertising Nexus” tax law, and re-enact it (with minor changes) as “urgency legislation” (blocking a referendum) but not taking effect until September 15, 2012 — and only if Congress does not enact a law on this issue (Amazon and many folks [including me] want Congress to pass enabling legislation for the Streamlined Sales Tax Project) by July 31, 2012. Once the governor signed the repeal and re-enactment as an “urgency” bill, Amazon’s referendum effort became moot.
California legislators claim that Amazon “agreed” that it will begin collecting California sales tax on September 15, 2012, if there is no superseding federal legislation, but I haven’t seen any such statement from Amazon. Some folks claim that Amazon also agreed to open distribution centers in California (jobs!), as part of this deal.
I’ve seen no news reports claiming that any other merchant, except Amazon, has “agreed” to begin collecting California sales tax when the revised law takes effect. (I tried in vain for months to identify a single merchant which started collecting sales tax for California [or any other state] because of these laws, except for Amazon’s early decision to “collect the sales tax and sue” in New York. That decision led other states to dismiss Amazon’s statement that it wouldn’t repeat that mistake, instead “calling Amazon’s bluff” — though it was clear long before California acted that Amazon wasn’t bluffing.)
In the absence of any evidence of an agreement (much less a binding agreement), I wouldn’t be surprised if another “urgency” bill is introduced soon to advance the effective date (perhaps making it effective on January 1, 2012).
California’s legislature knew, when they enacted the earlier law, that Amazon and other out-of-state retailers were never going to collect any additional sales tax; instead, as they did in other states, those merchants opted to terminate their advertising relationships with California web publishers to avoid any tax-collection duty.
Note that both California versions of this law include “nexus” provisions that weren’t in other states’ “Amazon Tax” legislation, based on the presence of several California companies which are owned or controlled by Amazon. This probably created an extra incentive for Amazon to negotiate a deal. I doubt Amazon has similar subsidiaries in most other states which enacted similar laws.
What’s missing from all news reports is any suggestion that Amazon or anyone else has any credible plan to persuade Congress to act on the Streamlined Sales Tax Project before July 31, 2012. Anti-tax advocates have consistently asserted that voting for such a law would violate the “no new taxes” pledge made by nearly all GOP members of Congress and state legislatures. (Note that nobody has proposed any new taxes, just a federal law to authorize the efficient collection of taxes which are already owed.)