Amazon.com has notified its 25,000 California affiliate marketing participants (Amazon Associates) of the company's intentions to  terminate their Amazon affiliate contracts. The giant online retailer is taking this action in response to the recently passed Golden State budget that was signed by Gov. Jerry Brown. There is a provision in the budget that calls for online retailers to pay tax on revenue generated by affiliate-related sales.

Such a tax would clearly have a major impact on Amazon. When similar laws were enacted in Connecticut, Illinois, North Carolina, Arkansas and Rhode Island, Amazon packed its bag in those states, as well.

The State of California hopes to generate about $200 million in additional sales tax revenue per year from the affiliate marketing sales tax. The state has been trying to mend a multi-billion-dollar shortfall in its budget.

New York has imposed a similar tax, but Amazon continues to run its Amazon Associates program in the Empire state. However, Amazon is is embroiled in a lawsuit against New York State.

Amazon’s California affiliate contracts will be terminated when the legislation takes effect.

Amazon's notice stated:

"We oppose this bill because it is unconstitutional and counterproductive. It is supported by big-box retailers, most of which are based outside California, that seek to harm the affiliate advertising programs of their competitors. Similar legislation in other states has led to job and income losses, and little, if any, new tax revenue. We deeply regret that we must take this action.

"As a result, we will terminate contracts with all California residents that are participants in the Amazon Associates Program as of the date (if any) that the California law becomes effective."