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Amazon, how could you dump us? An open letter to Jeff Bezos

By Andrea | Published: July 13, 2011

Amazon Sad LogoDear Jeff,

My husband and co-founder Steve and I have been long-time fans & customers of Amazon. I love what your company brought to online retail, and I love what you’ve brought to our home in particular – books, children’s toys, electronic devices, the kindle, streaming movies, the Amazon Visa card. For awhile you were even keeping us stocked in diapers, with new diapers arriving almost faster than we would realize we were running low.

When we launched Parents Guild we transferred our love of Amazon as parents into a love of Amazon as small social-good website creators and business owners. 100% of Parents Guild’s meager revenue comes from users clicking on links to Amazon in our posts and buying something.

Well, that should be past tense. It seems California decided to enact a tax on sales from affiliates in the state of CA, and your company is so upset and petty about it that you dumped us the minute the law passed. You sent us this letter:

For well over a decade, the Amazon Associates Program has worked with thousands of California residents. Unfortunately, a potential new law that may be signed by Governor Brown compels us to terminate this program for California-based participants. It specifically imposes the collection of taxes from consumers on sales by online retailers – including but not limited to those referred by California-based marketing affiliates like you – even if those retailers have no physical presence in the state.

We oppose this bill because it is unconstitutional and counterproductive. It is supported by big-box retailers, most of which are based outside California, that seek to harm the affiliate advertising programs of their competitors. Similar legislation in other states has led to job and income losses, and little, if any, new tax revenue. We deeply regret that we must take this action.

As a result, we will terminate contracts with all California residents that are participants in the Amazon Associates Program as of the date (if any) that the California law becomes effective.

The thing is, Jeff, that we are Californians. Paying taxes to our state benefits us and our family. If we didn’t have you, we would shop more at local retailers that DO pay taxes in California and DO reinvest in our local area. The more successful you are, the less our money stays in the area and the fewer funds we have for our local infrastructure.

I understand our messed up legislature may have (ack!) overstepped the Constitution here by attempting to tax interstate commerce, but it really does seem that you’ve been profiting unfairly on some outdated laws – why should businesses that do pay local taxes be forced to compete with businesses like yours that don’t, especially now that you can get me the same item instantly? Should we abolish all sales tax or level the playing field and find a legitimate, business-friendly way for everyone to pay it?

And why should your disagreement with my state government cause you to reneg on our mutually-profitable relationship? More to the point, if I was really depending on revenues from sales I sent your way to keep Parents Guild running, is grandstanding for political points and a couple of dollars in lost profit worth shutting me down (and all my small, independent, family-supporting, social-good-making peers that depend on the Amazon Affiliate ecosystem you created)?

Rather than slamming the little guy, your loyal customers and partners, in hopes we’d take up arms against our legislature, couldn’t you have considered just charging the requested sales tax and taking up the battle in court with the people you actually have a disagreement with – the ones who can do something about it?

Best regards,
Andrea Klein Lacy
co-founder, Parents Guild

UPDATE (4/22/13): And now, after years of lobbying against online sales tax, it seems Amazon WANTS to pay sales tax. http://www.npr.org/blogs/money/2013/04/22/178407898/why-amazon-supports-an-online-sales-tax-bill?utm_source=NPR&utm_medium=facebook&utm_campaign=20130422 And this is how business (and consumers and taxpayers) are played, folks.

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  • Anonymous

    Well said.

    • Anonymous

      thanks!

  • Anonymous

    According to IndieBound.org “when you shop at an independently-owned business, your entire community benefits:
    - Spend $100 at a local and $68 of that stays in your community. Spend the same $100 at a national chain, and your community only sees $43.”

    And spend $100 at Amazon… ???

  • Jeff

    Dear Andrea,
                                  
    Thanks for your letter dated July 13th. 

    I understand the pain our decision to rescind our Affiliates programme in California has caused you and I hope you don’t think the decision to sever so many mutually-lucrative affiliate relationships was taken lightly.

    The truth is these are the first shots in what will become a protracted war to tax US internet commerce at the state level. 

    Allied against us are the physical retailers who must compete against us while paying the local sales tax and the state governments who’ve looked uncomfortably on a growing volume of consumer transactions slip through their taxable net, in budget-conscious times.

    On our side, our fellow internet retailers and legions of affiliates struggle to influence state-level politics to prevent US internet commerce being impeded with the cost and bureaucracy of state taxes.

    So I appeal to you: ask not what Amazon can do for you, but what you can do for this process.

    Yours,
                 Fake Jeff

  • Pete

    “a couple of dollars of lost profit?”  how low is your sales tax.  more like millions/billions of lost profit.   If this is petty on Amazon’s part, why is it not petty on California’s part?  They could have written the law such that affiliates don’t count, especially after seeing how Amazon reacted in all the other states that did the exact same thing.

  • AffiliateGuy

    While it’s a pain, you can incorporate an LLC in another state to run your affiliate sales though. That’s what other CA affiliates are doing.

    If you depend on the affiliate income, this adds some complexity, but keeps you in business.

    It costs a couple hundred dollars to setup then an optional maintenance fee. Google for an incorporator service, there are hundreds.

    • Anonymous

      You’re right in theory but we are (I mean, *were*) not making enough money from affiliate links to consider this. It’s a major barrier to entry to require an LLC before testing different revenue scenarios. 

  • Anonymous

    Andrea – I have a question for you. You are a small company, and if you were selling online, do you think it would be fair if you started getting calls from the tax collectors in Florida, and Hawaii , and Maine, and the other 47 states saying, Hey, someone from our state bought something from your online shop in California, now you need to register in our state, and send us a quarterly tax check? That would be a terrible burden on thousands of small businesses! It is easy to look at amazon and say they are big, they can handle it, and forget the rest of us that can get swept into the mess.

    • Anonymous

      farah2 – great point. Amazon’s in a position to push for solving this problem the right way. The way that involves them competing on an even playing field with local retailers. The way that mandates states work together or the feds step in. Not the way that drives small businesses who have been sending traffic their way out of business.

  • Anonymous

    Amazon doesn’t mind paying sales tax. They do mind that state legislatures are violating the constitution with laws pushed by big box retailers.

  • http://twitter.com/magoon andy magoon

    The fact is that states don’t have a right to tax somebody outside of their state lines.  What some states are doing is really not legitimate;  they don’t have any authority over Amazon, and so they’re trying to shoehorn some way to exert authority they shouldn’t have.  Blame the states.  Amazon is simply protecting their business and their rights.

  • http://www.bennesvig.com Ben Nesvig

    Should be an open letter to Jerry Brown.

    • Anonymous

      Fair point, feel free to consider it such. It may be that we’re just suffering in the crossfire. But even though Amazon may or may not have a physical nexus here in California, I believe that they are selling things to me here, in my California home, as much as in Seattle or wherever their servers might be processing my transaction. I should probably be paying sales tax. But of course, consumers only do that when the vendor asks us to.

      • Anonymous

        Makes for a more clever and attention-grabbing headline the way you have it now, though. 

  • Anon

    I’m glad Amazon is doing this. That’s because I work at a small company that sells things online, and I don’t want to deal with the nightmare it would be to have to collect and report tax nationwide. Do you know how many different sales taxes there are? In a given state, the rate varies depending on county, city, and sometimes even by smaller units. There are at least 10000 different tax regions that you have to keep track of, and the boundaries and rates change frequently.

    The boundaries of the tax districts do not always line up with the boundaries of zip codes (although you can play it safe and just charge the highest tax rate that is applicable somewhere in that zip code).

    Once you figure out what to collect for a given customer, you aren’t done. You have to them pay the tax to the state, and give them sufficient data so they can figure out how to apportion it among all those various tax districts of theirs. Of course each state will have its own formats it wants the data in.

    Amazon could deal with this. They are big enough and profitable enough that they could devote to this the several people it would take. Smaller companies would be screwed.

    The only way to make national collection feasible is for states to simplify things, so that there is at most one rate per zip code (ideally one rate per state for out of state sales), and for there to be uniform standards on reporting and data formats. The best way to handle this would be for each merchant to pay the tax to his own states, and have the states settle among themselves. That way, a given merchant ONLY deal with the tax authorities in his state, reporting his out of state sales on the same forms he uses to report his instate sales.

  • http://www.projectit.com Anonymous

    Andrea, so, did Parents Guild donate, say 8.25% of your link revenue back to the state of California to account for their loss of sales tax revenue? If not, why not?

    • Anonymous

      Surprisingly, we did not. Typically, it’s the consumer who pays sales tax at the point of purchase, when the vendor typically asks for it. Parents Guild is neither the vendor nor the consumer in a transaction on Amazon.com. 

      I don’t think of taxes as donations, I think of taxes as shared effort to offset the tragedy of the commons – i.e. if we need consumers to buy things, and vendors to sell things, then we at some point decided it was desirable to allot some %age on top of that transaction to pay for the shared services that allow consumers and vendors to buy, sell and live. (Presumably we decided it would be expedient to not rely on the spontaneous charity of 3rd parties, as desirous as they might be to use those shared services.)

      • http://www.projectit.com Anonymous

        I think your “Ain’t my job” reply (consumers job to pay sales taxes) is a bit of a dodge, personally. After all, the thrust of your argument is that Californians benefit from paying said taxes and so your decision to not donate the loss of sales tax revenue from your link revenue seems a little self-serving. In effect, “Thank you Amazon for this previous ‘sales tax’-free revenue stream but now that it’s gone, by golly, you really should willingly be putting yourself in an uncompetitive advantage by charging the consumers for them.”

        You are right, taxes are not donations, they’re confiscatory. However, you are making the case that Amazon consumers should essentially “donate” them, are you not? I guess my thought is that you would stand on firmer moral ground if you would have voluntarily cancelled your Amazon affiliation or have decided to “donate” a portion of your, apparent, ill-gotten revenue just as you are expecting Californian consumers to do.

        Anyway, Amazon is on record for supporting a federal solution to this problem since that is where it should and, Constitutionally, must come from, more at http://buswk.co/kwRsy6

        [excerpt]
        Surprisingly, Jeffrey P. Bezos, Amazon’s founder and chief executive officer, recently told Consumer Reports that he supports federal legislation that rationalizes the patchwork of 30,000 state and local sales-tax jurisdictions around the country, each with its own rules and administrative quirks.
        [/excerpt]

  • Sara

    hear hear.

  • Mezasd

    You know, ive been a customer of amazon for 7 years, best thing bout it? No sales tax. If i went to buy something thru your link, and i had to pay sales tax, then i wouldnt buy it from you anyway. Amazon did the right thing. This was a power move by target, walmart, etc to eliminate the competition and gov. Brown probably took a bribe to make this happen. So your little letter needs to go to sacramento not amazon

    • Anonymous

      You know, Mezasd. I agree with you. No sales tax, package arrives within a couple of days, who am I to complain? The question is, how is that fair? If you’re anti-sales-tax, why not be anti-tax for Target & Walmart?

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