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Amazon threatens California associates over state sales tax

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STEVE CHIOTAKIS: The Assembly in cash-strapped California approved -- and Governor Jerry Brown signed yesterday -- a new law that taxes anything residents of the state buy online at the time of purchase. Lawmakers are hoping to bring in more money with the law. But -- and it's a big one -- this is a controversial road California and other states like New York and Illinois have been down before.

The nation's biggest online retailer, Amazon, is now threatening to sever ties with independent sellers in the state that use Amazon to promote their products. That's a move that could provide a loophole for Amazon so it doesn't have to collect those taxes.

Declan McCullagh is a senior writer with CNET he's with us now from San Francisco to talk about it. Good morning.

DECLAN MCCULLAGH: Hi good morning.

CHIOTAKIS: Now, you know here in California this is called the Amazon Tax Bill. So I mean, what's this spat all about?

MCCULLAGH: Right. I mean, the state of California is trying its best to find more sources of revenue and so they're targeting Amazon. Right now, if you're in California you can buy stuff on Amazon without having to pay sales tax at the time of check out and California wants to change that. The problem is that the new law might not be entirely -- well -- legal and constitutional. It's very contested.

CHIOTAKIS: Can Amazon -- because I know Amazon is threatening to move it's affiliates out of California, and they've done that in other states as well. Can they do this forever? Like, with every state that comes up with this kind of legislation?

MCCULLAGH: They've done it in about five or six states so far. So I think the answer is probably yes. I mean they just need a few states where they can have their locations and their warehouses, and then they can take advantage of current Supreme Court presences that says basically out states retailers don't have to collect taxes. And right now they've got warehouses in Nevada, they've got warehouses in Texas and I think they can actually do this for a while.

CHIOTAKIS: So if I were to go and buy something on Amazon today, the law took affect last night, right? If I were to buy something today, they're not going to charge me sales tax.

MCCULLAGH: Correct. Nothing's changed right now, at least in the eyes of Amazon. Whether California's going to send Amazon a whopping bill is a different story.

CHIOTAKIS: Declan McCullagh, senior writer with CNET. Declan thanks.

MCCULLAGH: Thanks, it's a pleasure.

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Contrary to popular belief, collecting sales tax for different states on internet transactions is not really that big of a deal –thousands of internet sellers are already doing it with SaaS solutions like AvaTax that plug right into e-commerce shopping cart apps and handle all of the complex tax rates and rules juju. The software just automatically applies the correct rates in the shopping cart and the merchant never has to think about it. And…it costs WAY less than an audit. I don’t buy it. The complexity issue is a foil for other biz objectives.

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