California Gov. Jerry Brown approved a bill stipulating that online retailers, such as Amazon.com, collect sales taxes on purchases made by California residents starting Friday. But Amazon.com and Overstock.com are defying the new law.

In a statement sent to The New York Times, Amazon called the legislation “counterproductive” and said the company would not charge sales tax for the state.

Amazon terminated their Affiliates Program in California as of Wednesday in response to the new legislation. The law considers Amazon’s advertisements on affiliates' sites as a selling presence and hoped to force sellers to collect taxes.

By ending the program, Amazon, which sells products nationwide, may have exempted their company from California’s new law.

Other web-based companies based in California worry that the new law could make it even harder for their small businesses to compete with big-box chains.

The Coalition to Protect Small Business Jobs unsuccessfully appealed to Gov. Brown not to sign the bill into law. The group argues the new law makes it “harder” to “compete with larger retailers on the web.” The law has already ended sources of revenue for many small businesses which were part of Amazon's Affiliates Program. 

Amazon, which has called the tax “unconstitutional,” has pointed out that similar legislation in other states “has led to job and income losses, and little, if any, new tax revenue.”

However, the company is currently embroiled in similar fights in other states that are looking to Amazon to make up some of their budget deficit.

 

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