Last week, Amazon announced its refusal to comply with California's new tax law, which, for the first time, requires Internet-based retailers to pay California state sales taxes on eligible transactions. While this refusal caused quite a stir in the online community, the quiet approval of the law by other retail giants went relatively unnoticed.

The law, enacted to help balance California's new budget, must comply with the 1992 case of Quill Corporation v. North Dakota, in which the Supreme Court ruled that retailers could only be required to collect sales tax if they had a physical presence in the state. Amazon itself does not have such a physical presence (known legally as a “nexus”) in California, but it does have business relationships with smaller, independent companies, known as “affiliates,” which receive a small commission for advertising Amazon products. When Amazon announced its refusal to pay sales tax, it did so on the legal grounds of removing its nexus in California by terminating its relationship with these affiliates, as it has done in the past in response to similar tax measures in other states.

While this move has California small businesses and the state legislature worried, other major retailers have made it clear they support the new law, which they have begun calling “e-fairness.”

When rumors of a potential online sales tax began circulating in February and March--even with Amazon's hint it would sever its ties with affiliates if such a law were passed--several companies were in support of such a law. In February, Barnes and Noble sent an open letter to Amazon's California affiliates in which it extended an official invitation to those affiliates in the event of a termination of their contracts.  Hardly a month later, several other major retailers had done the same.

“If Amazon actually does sever their relationships with California affiliates, companies like Barnes & Noble, Walmart, Best Buy, Target, Sears, among others have [...]," said Bill Dombrowski, President and CEO of the California Retailers Association, said in a statement. "Let them know that they will still have a home.”

These California companies argue online-only companies like Amazon have nearly a ten percent advantage over in-state companies because of the sales tax loophole. They further contend if these companies were required to collect sales tax, states would net billions each year, assisting the still-sluggish economy.

In the aforementioned statement, Dombrowski goes on to cite the bankruptcy of Borders as one example of the economic burden created by the out-of-date legislation; The Supreme Court's Quill ruling, after all, was handed down in a pre-Internet era, and initially affected only mail order companies.

Dombrowski's statement was made before the California legislature's push came to Amazon's forceful shove. Now that Amazon has made good on its threat to sever ties with over twenty-five thousand California affiliates, have the major retailers changed their tune?

“We thank Governor Jerry Brown for demonstrating his commitment to California businesses by signing e-fairness into law,” said the CEO of Barnes and Noble, William Lynch, on the day the new law came into effect. “We believe that e-fairness will improve the economy, add jobs, and help struggling businesses everywhere in California. By signing this law, the Governor has made clear that his priorities are to help bolster economic recovery. This is a huge win for business in the state of California.”

You can reach staff writer Sean McGuire by clicking here.