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Tales of a Failed State: More Problems with California's 'Amazon Tax'

As we have previously reported, it looks like the proposed “Amazon tax” scheme being pursued by California liberals is going to do severe damage to the state’s already hurting economy and affect a broad swath of internet-based businesses known as “affiliates.”

But from the Sacramento Bee, we learn that California-based eBay– a big name in the state– has also grown deeply concerned about the effects of the proposed legislation:

California lawmakers thought they were targeting Amazon.com, the out-of-state giant, when they voted last week to force Internet retailers to collect sales tax.

It turns out eBay Inc., California’s own golden child of e-commerce, isn’t so thrilled about it, either.

The San Jose online auction company says the legislation would hurt its business model, which relies on thousands of entrepreneurs who sell goods on its site.

The intent may have been to go after Amazon, but “we’re literally caught in the crossfire,” said David London, senior director for state government relations at eBay.

This news story comes only one day after Cal Watchdog reported that this tax could kill off 25,000 California businesses, costing the state jobs:

Performance Marketing Association Executive Director Rebecca Madigan said her association opposes [Assemblywoman Nancy] Skinner’s bill. PMA represents 25,000 California small-business affiliates who earn revenue by placing advertisements for online retailers on their Web sites.

Madigan said they will be forced to move or terminate their businesses if AB153 is signed into law. “That’s 25,000 small businesses that will be lost to California’s already struggling economy,” said Madigan.

Currently, the ‘Amazon tax,’ repackaged as AB 27 X1, is in legislative limbo. The tax was part of the budget deal that was recently vetoed by Governor Jerry Brown. Now legislative analysts are trying to figure out if the ‘Amazon tax’ can go directly to the governor, who has signaled his support for the tax, or if the bill has to go through the legislature again.

It is important to note that thanks to Proposition 26, “Amazon Tax” legislation is almost certainly required to garner the support of 2/3 of both the Assembly and the Senate in order to pass. When the tax was passed earlier this year, it fell short of this mark. It does not appear that enough Republicans are going to change their mind anytime soon to meet the supermajority requirement.

So no matter if this tax goes directly to the governor or back through the legislature and then to the governor’s desk, the “Amazon Tax” will be challenged in court, and the tax appears likely to be eventually deemed unconstitutional (“Amazon Taxes,” say experts, fall afoul of the Supreme Court’s ruling in Quill v North Dakota).

In the meantime, companies like Amazon and Overstock.com will cut any and all remaining ties to the state, small businesses who benefit from participating in affiliate programs with online retailers will be severely hurt, eBay may take a big hit, and the state will continue to hemorrhage jobs.

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