California and Governor Jerry Brown made a massive error in the formation of a California Online Tax, that amounts to tripple taxation in the state for online S-corporations. Amazon and Overstock aren’t the only ones hurt by the new tax, and it should be challenged in court. But before we continue, this news…
Amazon just sent a letter to this blogger titled “Notice of Contract Termination Due to Potential New California Law,” and explaining that the California Online Tax has caused them to take action…
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.
Fine here, because the Amazon Associates program wasn’t one emphasized on my blogs and websites. But it, well, was, compelling because some Amazon Affiliates made thousands of dollars per month from their programs, in some cases drawing five-figure checks per month. Now, not only is that gone, but Amazon Affiliates have to spend, in some cases hours, redesigning and recoding websites to reflect the departure of Amazon and Overstock, and the other organizations.
Which leads back to the initial argument.
Frankly, while the law itself has many affiliates hoping mad, it was bound to happen. But the law’s got a nasty bug in it that must be cleared up. I’ll use my online sports game company as an example.
The State Of California has already taxed my Internet company for income earned. All of our sales are online. Plus, they get me for a personal income tax!
Under the new law, an online company like mine could be taxed three times: for total income tax, corporate, tax and then for sales tax. That’s too much.
There’s nothing in the law preventing such a scenario from happening, because there’s to language to restrict the State Of California from such an action. If you’re an online legal California Corporation, you’re going to get taxed three times. It’s that simple.
Really, you are going to be taxed three times. Because the State of California’s set up to collect taxes under the assumption that you work for someone else, if you set up a company and are the primary employee of the company, the State Of California will hit you with a personal income tax, a corporate tax, and now this sales tax.
That’s really ridiculous.
It sets up the situation I’ve been dealing with in trying to explain to the California Franchise Tax Board that they’re taxing me the wrong way.
And since the law just states that it’s going to tax “online vendors,” and says nothing about those who already pay a corporate tax, this is a massive problem that Governor Brown’s created.
It sets up a massive incentive for thousands of California Corporations to just quit the state and find other homes. The simple fact is that many internet vendors who don’t want to pay the tax can find all kinds of ways around it. I personally think California needs my tax money, but just because of that, the State seems eager to take from me, far more than it rightly, legally deserves. I’m ready to keep working with them, but I wonder if anyone cares?
One day next year, Governor Brown’s going to wake up to the reality of no new taxes collected, and a massive exodus of Internet vendors. By then, any retro action would be too little, too late.
If you ask me, little attention was paid to the fact that the State’s got too many people in jail who, if San Francisco Public Defender Jeff Adachi’s recent findings of police misconduct are any indication, have been sent their under false pretenses. A complete, state-wide investigation would undoubtedly lead to the release of hundreds of thousands of people, and the savings of millions that we didn’t need to spend anyway. That savings would have allowed for the avoidance of this online vendor tax.
Jerry, you need to call me. You’ve got my number and my email, too. Someone’s not giving you good advice.
Stay tuned.
Bill Carroll