In order to raise a fairly trivial amount of revenue, California is considering requiring any online retailer with an affiliate organization in the state to charge its residents sales taxes.  Unfortunately, the response to such moves by other states has not actually resulted in the sales tax being charged; it has resulted in the affiliates relationships being shut down, causing a net loss in tax revenue (since Amazon affiliates have to pay taxes on their income). 

This would be harder to do in a big state like California--but then, Amazon has more to lose in a big state by eroding its competitive edge.  At any rate, Amazon is promising to shut down its affiliates if the law passes, though of course, it would say that in any event.

California could, of course, demand information on all the people who bought in their state.  But it would be hard to enforce a sales tax without SSNs, and I doubt that California wants to start mailing new bills to its residents--that being why they're trying to force Amazon to collect the tax for them.  Should be interesting to watch.  I mean, unless you're a Californian with an affiliates account.

Update:  A commenter points out that Amazon does collect revenue for New York, which has a similar law; I knew that, but had erroneously believed that this was pursuant to a different law.  I'm not sure why Amazon collects tax for some states, but not others, though in New York, unlike other states, the company tried to work through the courts.

Is California more like New York or North Carolina?  My instinct is to say "New York", but the New York exception may have to do with the fact that there are a whole lot of media companies headquartered in New York, so the expected loss on affiliate income is bigger.  As far as I know, the other states in which they collect taxes are the ones where they have physical warehouses. 

I assume we'll find out, anyway.

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