SACRAMENTO, June 30 (UPI) -- Internet giant Amazon.com said a new sales tax law in California was unconstitutional, but did not say how it might challenge the statute.
"We oppose this bill because it is unconstitutional and counterproductive," Amazon wrote in a note to California businesses referred to as affiliates.
Amazon said it would no longer pay commissions to affiliates when the law goes into effect on Friday, The Los Angeles Times reported.
California's new tax law says having affiliates in the state qualifies the retail company as having a physical presence there.
It is the seventh state to put an online tax code in place. In California, most residents of the state will pay a sales tax of 7.75 percent beginning Friday.
The U.S. Supreme Court has already ruled that a state cannot collect sales tax from companies that have no physical presence in the state. In response, California changed the definition of physical presence to include companies with affiliates in the state.
Without the new law retailers not based in California -- Amazon is based in Seattle -- enjoy an automatic discount said Bill Dombrowski, president of the California Retailers Association.
"You can't give one segment of retail a 10 percent discount every day. It's just not fair," Dombrowski said.
The new tax code is figured to provide California with $317 million in extra revenue each year, but it also means the departure of some of the estimated 25,000 affiliate businesses in the state.
"We have to consider it (moving). It does not look good for our business," said Loren Bendele, chief executive officer of Savings.com, a Web site business based in Los Angeles.
