Next up in Amazons tax war: California

Amazon is prepared to take its sales tax war to one of the biggest arena of all: California.

In an email sent Wednesday, Amazon warned that it will shut down its Amazon Associates Program for California-based participants if the state passes a proposed bill that would impose new taxes on online retail sales.

As online shopping has ticked up, more and more states have begun passing laws that require online retailers to charge sales taxes. Amazon has been battling with state legislatures over whether or not its transactions should include the same sales taxes required of brick-and-mortar retailers. Amazon has already terminated its affiliate programs in such states as Arkansas, Colorado, Connecticut, Illinois, North Carolina, Rhode Island and Texas due to the battle over sales tax.

The warning to California is in line with what Amazon CEO Jeff Bezos reported remarks at a ShopSmart Shopping Summit held in New York in May: We will continue to drop states who pass those affiliate laws, from the affiliate program.

If nothing else, Amazons showdown in California proves that Bezos is a man of his word. But California is well known to be a major and uniquely important economy in and of itself. Time will tell whether the decision to go to the mat with the Golden State will turn out in Amazons favor.

Here is the email sent by Amazon to its California associates program affiliates:

Hello,
For well over a decade, the Amazon Associates Program ha! s 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.
Regards,
The Amazon Associates Team