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On The Money: California Taxes The Internet

SACRAMENTO (CBS13) -- California is now taxing the Internet – but will it bring in extra revenue – or hurt the economy even further? Democrats think the so-called Amazon Tax could bring in as much as a billion dollars in extra revenue. But Republicans are convinced California will lose jobs because of it.

Up to 25,000 affiliates of Amazon and other online retailers – people who make money on click throughs from their Web sites – have now been terminated.

"We definitely will be affected by this," said Alexis Caldwell, of SurfMyAds.com.

Caldwell told CBS 13 her company will lose tens of thousands of dollars – and previous plans to hire 10 extra people are now on hold.

"The true effect of this tax law is not going to collect more taxes for California." Caldwell stated in an interview via Skype. She told CBS 13, "I think that's a huge misconception. Really it's just hurting small businesses."

Musical recording artist Glenn Richards has a small business earning commissions on Amazon sales through his Web site. He says he'll lose revenue now that California is taxing the Internet.

"They're fighting the wrong people," Richards said. "They're fighting the people who make money. I mean I don't have anything to do with politics."

But at the State Capitol, it's all about politics – and up to a billion dollars in new revenue – according to one of the authors of the new Internet tax law.

"It would restore our funding for higher education," said Senator Lonnie Hancock. The Berkeley Democrat told CBS 13, "It would restore many of the health programs we've had to cut. It would restore funding for our children."

Small book stores and other brick and mortar retailers say they'll be on a level playing field now with Internet companies from out of state.

The intent of the legislation is to "take up the slack from the companies like Amazon that really want to bully states," Hancock stated. "Everyone is hurt when there are a class of businesses that don't pay their fair share."

But Amazon is expected to challenge the law in court, claiming it is unconstitutional – based on previous court rulings that Internet sellers must have a physical presence in a state in order to collect sales taxes.

And Amazon's former affiliates say California will never get that billion dollars in extra revenue – because small company owners with lower revenues will be paying far less in income taxes.

"California needs more money and we know that," said Alexis Caldwell of SurfMyAds.com.
"But this is definitely not going to do it."

Amazon.com's Full Statement:

"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"

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