California tells online retailers to start collecting sales taxes from customers

Beginning July 1, a new California state law will require large out-of-state retailers to collect sales taxes on purchases that their California customers make on the Internet — a prospect eased only slightly by a 1-percentage-point drop in the tax that also takes effect at the same time.

Getting the taxes, which consumers typically don't pay to the state if online merchants don't charge them, is "a common-sense idea," said Gov. Jerry Brown (D-CA). The new tax collection requirement — part of budget-related legislation — is expected to raise an estimated $317 million a year in new state and local government revenue. But those taxes may come with a price. Amazon and online retailer Overstock.com Inc. told thousands of California Internet marketing affiliates that they will stop paying commissions for referrals of so-called click-through customers. That's because the new requirement applies only to online sellers based out of state that have some connection to California, such as workers, warehouses or offices here. Both Amazon in Seattle and Overstock in Salt Lake City have told affiliates that they would have to move to another state if they wanted to continue earning commissions for referring customers.