Some say as California goes, so goes the nation. So the California law that went into effect Friday, requiring online retailers like Amazon (NASDAQ:AMZN) to pay sales taxes, may have implications for the rest of the country.
Already 8 other states have enacted similar laws.
As of July 1, Amazon must collect sales taxes on purchases that Californians make on the Internet. The law is expected to help level the playing field with brick and mortar retailers who have been charging for sales tax for decades.
Amazon, however, has called the bill unconstitutional and said it refused to pay the sales tax, reported the Los Angeles Times. Amazon last week did what it’s done in other states which have passed similar laws—it told its local Internet marketing affiliates that it will no longer pay them. Affiliates are smaller sites that get commissions for referring their visitors to Amazon. If the affiliates have a physical presence in a certain state, then that state justifies a sales tax.
This all stems from a 1992 Supreme Court ruling that says states can’t force retailers to collect sales taxes unless the retailers have a physical presence in the state.
The California law goes beyond the similar passed in states such as Illinois, Minnesota, Hawaii and Vermont.
It says that California may collect sales taxes from a retailer if it designs or develops products. Amazon sources its Kindle from a plant in California, said The Wall Street Journal.
California tax officials said they will start sending out notices of the new tax to out-of-state Internet sellers who are immediately expected to begin collecting sales taxes.