California Governor Jerry Brown recently signed a bill into law that imposes state sales tax on all online transactions made within the state. Similar bills have been passed in a number of other states, despite of the efforts of online retailers to prevent their passage.
Each time a state passes an online sales tax bill, Amazon, the Internet's largest retailer, has terminated its associate programs in the state. Amazon Associates are third-party affiliate marketers for Amazon in each state that agree to sell products on Amazon and receive commissions for Amazon referrals and linking their websites to Amazon.
Amazon has warned states considering levying sales tax for online sales that it would end its affiliate programs, and so far Amazon has made good on that warning.
California had well over 10,000 Amazon affiliates, and in a recent letter Amazon stated that all contracts with those affiliates were terminated as of June 29, 2011. As other states look to an online sales tax to fill in budget deficits, expect this issue to be raised again.