The Amazon Associates Program (http://macte.ch/ZoW3J), one of the first online affiliate marketing programs, is being discontinued for California due to a proposed law that imposes the collection of taxes from consumers on sales by online retailers.

The Amazon Associates Program developes solutions to help website owners, Web developers, and Amazon sellers make money by advertising millions of new and used products from Amazon.com and its subsidiaries, such as Endless.com and SmallParts.com. When website owners and bloggers who are Associates create links and customers click through those links and buy products from Amazon, they earn referral fees.

The California State Assembly has passed and referred to the state Senate a bill that requires online and catalog retailers to collect sales tax if they have in-state physical operations, including those operated by sister companies. The bill, introduced by Assemblyman Charles Calderon (Democrat) seeks to clarify when retailers come under existing federal law that allows a state to require direct-to-consumer retailers to collect sales tax, according to "Internet Retailer" (http://macte.ch/Q7od3).

The measure specifies that any in-state physical presence, such as stores or distribution centers, even if owned by a subsidiary, qualifies as nexus, the legal term for a physical presence that imposes the tax-collection obligation. Some retailers, including Amazon, attempt to avoid the sales tax requirement by contending that their distribution facilities, for example, are operated by a separate subsidiary not directly tied to their retailing operation.

The following letter from the Amazon Associates Team has been sent regarding the matter:

"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. We will send a follow-up notice to you confirming the termination date if the California law is enacted. In the event that the California law does not become effective before September 30, 2011, we withdraw this notice. As of the termination date, 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 on or before the termination date 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 their 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. We are also working on alternative ways to help California residents monetize their websites and we will be sure to contact you when these become available."