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Amazon Drops California Associates to Avoid Sales Tax 623

Posted by samzenpus
from the tax-the-tubes dept.
PCM2 writes "Residents of California who participate in the Amazon Associates Program received an email warning them that the program will be terminated as soon as a new California law goes into effect. The law, which CA governor Jerry Brown signed, would require online retailers to collect sales tax on purchases. According to Amazon's statement, '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.'"
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Amazon Drops California Associates to Avoid Sales Tax

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  • by Anonymous Coward

    Good one, Governor Moonbeam! You just killed the revenue stream of roughly 25k Amazon affiliates. So instead of just being content with the revenue collected from the income tax of those affiliates, you decide to double-dip and tax not only the income earned by the affiliate but the transaction as well. Instead of allowing you to double-dip, Amazon pulls the plug on their affiliate program in CA and your projected $200+M tax revenue increase goes up in smoke. CA is a turd circling the drain. They might

    • How many of those 25k affiliates "forgot" to include their affiliate income? How many others were so insubstantial that no income tax was owing?

      It's the same problem with ebay, and the crack-down is inevitable. Let them compete on an equal footing with the locals, and each will win their fair market share based on price, product, and service.

      Instead, local business is indirectly subsidizing Amazon by carrying a disproportionate share of the tax burden.

      • by Chaos Incarnate (772793) on Thursday June 30, 2011 @09:02AM (#36621520) Homepage
        What tax burden is Amazon imposing on the state? They're not using any land in the state, they're not using any services that they aren't already paying for (the postage pays for the gas taxes that pay for the road use by the delivery company's vehicles) The state wants money without doing anything in exchange for it.
        • Re: (Score:3, Interesting)

          by mc6809e (214243)

          What tax burden is Amazon imposing on the state? They're not using any land in the state, they're not using any services that they aren't already paying for (the postage pays for the gas taxes that pay for the road use by the delivery company's vehicles) The state wants money without doing anything in exchange for it.

          We're way past that.

          Taxes are collected from those that make money to be given to those that do not.

          You got it. They want it. You run away if you can. If you can't escape, tough. That's all you need to understand about taxation today.

          • Taxes are collected from those that make money to be given to those that do not.

            Partly correct. Sometimes taxes are collected from those that make some money to be given to those who have lots of money [downsizinggovernment.org].

          • by Kelbear (870538) on Thursday June 30, 2011 @12:37PM (#36624076)

            Government provides them with an orderly society in which to conduct business.

            They don't need to fund a private security army to ensure collections and protect goods in transit amidst anarchy. We have police and a legal system rather than mad max lawlessness.

            They also get to hire from a market of educated employees rather than taking in savages from the fields and teaching them letters and numbers.

            There are numerous links running back and forth between the private and public sectors that feedback upon each other.

        • Re: (Score:3, Informative)

          by AmiMoJo (196126)

          I think you misunderstand what he means by "burden". Just because Amazon doesn't use any services or resources in California does not mean they don't own them anything.

          Amazon wants access to the Californian market. In exchange for that they have to abide by Californian law when operating there, both in terms of things like consumer protection laws and in terms of taxation. Even if they don't use any services in California themselves they are a) competing with Californian businesses who do pay taxes for the

          • by Khyber (864651)

            "Amazon wants access to the Californian market"

            Such thing does not exist when the market is a GLOBAL NETWORK.

            "In exchange for that they have to abide by Californian law when operating there"

            Learn how interstate commerce regulations work, and understand that only the Federal Government was granted this power, not the states, ESPECIALLY not California.

            "both in terms of things like consumer protection laws"

            Yes...

            "and in terms of taxation"

            But no. I've checked the tax codes for each county and the state of Calif

            • by SETIGuy (33768) *

              "Amazon wants access to the Californian market" Such thing does not exist when the market is a GLOBAL NETWORK.

              Bullshit. Plain and simple. Do you think Amazon gets to avoid VAT on European sales? I think the State of California should block amazon.com from DNS resolution on state owned DNS servers, and block amazon.com's IP address at state owned routers. I think they should do it today, and promise the same for other tax evaders. I'm sure that amazon mp3 won't miss access to UC campuses. College students and faculty never buy books, right? I'm also sure that there aren't any government agencies that use amaz

      • by bdsesq (515351) on Thursday June 30, 2011 @09:28AM (#36621778)

        How many of those 25k affiliates "forgot" to include their affiliate income?.......

        So anyone who has a different opinion from yours is a law breaker?
        Or is that what you do when you think you can get away with it?

        Amazon's position has been tested all the way to the Supreme Court.
        Amazon is in the right and CA is trying to do something the Constitution prohibits.
        Nuff Said!

        • Amazon's position has been tested all the way to the Supreme Court.
          Amazon is in the right and CA is trying to do something the Constitution prohibits.

          It's worth noting that the Supreme Court's Quill decision in 1992, while upholding the Bella Hess (1967) physical presence test, did so not on the basis that physical presence was inherently Constitutionally mandatory (indeed, it took the unusual step of specifically noting that it was likely that, had the issue been one of first impression in 1992, the decisi

      • Re: (Score:3, Insightful)

        by operagost (62405)

        How many of those 25k affiliates "forgot" to include their affiliate income?

        Well, then shouldn't they be putting laws in place to catch the income tax cheats? Just like states like California to lazily throw legislation at an enforcement problem. This punishes the law-abiding instead of the criminal.

        • by rahvin112 (446269)

          The tax system is predicated on voluntary compliance, severe penalties and enforcement of high profile cases. If everyone stopped paying taxes they wouldn't have enough enforcement in place to get them. That's exactly the problem in this case, the sales tax system has become so broken by internet sales (no one is voluntarily paying the taxes owed) that they are at the point where the states can't use normal enforcement measures. Expect this to get much worse and much more aggressive because the states are b

      • Answer: All (Score:4, Insightful)

        by SuperKendall (25149) on Thursday June 30, 2011 @10:37AM (#36622644)

        How many of those 25k affiliates "forgot" to include their affiliate income?

        Substantially less than the new number of affiliates, 0, which will no longer have affiliate income to tax, nor will be spending affiliate generated income in California.

        That's right, even if eery single affiliate were not reporting taxes, California STILL would have been better off with that affiliate income entering the state.

        How many people getting by on affiliate income will be forced to leave the state or go on state assistance now I wonder? I'll bet THAT answer is > 0...

      • by Maestro4k (707634)

        How many of those 25k affiliates "forgot" to include their affiliate income?

        Even if this is true, this is Amazon's problem how exactly? Perhaps if the goal is really to catch those lying on their taxes then a law requiring companies to report affiliate income paid to CA residents would be a more appropriate solution. Not that such a law would be without issues, as it attempts to impose a regulatory burden (compiling those reports isn't free) on a company that has no physical presence in California.

        And frankly, I think you overestimate how big a problem this is. Most people runni

    • by cyber-vandal (148830) on Thursday June 30, 2011 @08:42AM (#36621340) Homepage

      Because liberals realise that the things we take for granted have to be paid for by someone. They also realise that Amazon affiliates have a state-granted advantage over local brick and mortar businesses and has decided to remove that advantage. What is it with righties and their belief that they shouldn't have to pay anything towards the wonderful developed world lifestyle they enjoy?

      • Re: (Score:3, Interesting)

        by zraider (759486)
        Because it's not the government that provides us with that "wonderful developer world lifestyle". It's private enterprise like Amazon.
        • by rgmoore (133276) <glandauer@charter.net> on Thursday June 30, 2011 @09:58AM (#36622116) Homepage

          Yes, Amazon provides some of that lifestyle. Of course Amazon sells it using the DARPA developed internet and ships it on public roads, often using the US Postal Service. They hire programmers who were educated in public schools and at public universities. When they're worried about competition, they sue their competitors in Federal Court, often over patents issued by the USPTO. Their facilities are protected from crime by publicly funded police and from foreign invaders by the US military. If one of their buildings catches fire, it will be put out by publicly funded fire fighters. That's a developed world lifestyle, and it's made possible by the continuous effort of a capable government.

          • Normally I don't comment people's sigs, but yours is instructive here. The phrase "question authority" doesn't mean "question authority at a town hall meeting", it means, "question the legitimacy of authority to control you and take your stuff". Similarly, you believe that there are a whole host of things that high income countries have because they're provided by the government. But we're talking about a state sales tax, and you're talking about a list of services that Amazon doesn't get from the state of California:

            * Roads used by the U.S. Postal Service to deliver things are paid by gas taxes paid by USPS out of the postage it collects.
            * The programmers' education was primarily to their benefit, not Amazons. They're not slaves. And to the extent those programmers got in state tuition, they or their families were taxpayers in that state.
            * Federal courts are not administered by the state of California.
            * Amazon doesn't need California police since they're not in California.
            * California doesn't protect Amazon from (absurdly hypothetical) foreign invaders.
            * Since Amazon's warehouses are not in California, so California's firefighters will not be the ones to protect them.

            The California government is trying to shake down Amazon. Amazon is right to resist.

          • by LoyalOpposition (168041) on Thursday June 30, 2011 @11:32AM (#36623294)

            Of course Amazon sells it using the DARPA developed internet ...very little of which was financed through the use of California sales taxes.

            ships it on public roads ...for which it pays the shipping companies, who, in turn, use the money Amazon gives them to pay fuel and vehicle taxes.

            often using the US Postal Service ...which is a private company (with a government granted monopoly) financed by postage.

            hire programmers who were educated in public schools and at public universities ...who receive higher incomes and, therefore, pay more income taxes. The money to pay the income taxes comes from Amazon.

            sue their competitors in Federal Court ...for which Amazon pays their own lawyers. The money to support Federal Courts, themselves, I think comes from federal income taxes, which Amazon pays. But perhaps you meant California State Court. You actually have some point with this one. On the other hand, Amazon pays taxes to support Washing State Court, and Amazon's competitors, possibly including competitors in California, can sue Amazon in Washington.

            over patents issued by the USPTO ...for which Amazon pays federal income taxes.

            Their facilities are protected from crime by publicly funded police ...for which Amazon pays Washington state and local income taxes, property taxes, sales taxes, and a variety of others.

            and from foreign invaders by the US military ...for which they pay federal income taxes.

            If one of their buildings catches fire, it will be put out by publicly funded fire fighters ...for which Amazon pays Washington state and local income taxes, property taxes, sales taxes, and a variety of others.

            That's a developed world lifestyle, and it's made possible by the continuous effort of a capable government.
            Perhaps so, but why should Amazon pay California sales taxes?

            ~Loyal

      • Re: (Score:3, Interesting)

        by Calos (2281322)

        First things first: You, and the person you replied to, are what is wrong with the world today. Highly polarized, closed-minded, hating opposing viewpoints with generalities, getting nothing done. Congratulations.

        To the meat of your post...

        First, what are these things "we" take for granted? Why are you completely closed to a benefit-cost analysis? Why are you completely closed to the idea that others may not take it for granted and/or may not want it at all?

        Second - state granted advantage? That's a bol

        • by AmiMoJo (196126)

          why do you think that the "developed lifestyle we enjoy" requires constant tax increases?

          Inflation.

          In the UK we also have to keep giving the NHS more money to provide state of the art medical treatment and care for a growing number of elderly people, but then again we believe that the state is the best way to do that so most people are in favour of it.

      • by TarPitt (217247) on Thursday June 30, 2011 @09:52AM (#36622052)

        Because liberals realize without small things like state-financed universities, companies like Amazon would never exist in the first place.

        When people call for government cutbacks, do they realizing they are cutting back future sources of research and highly skilled employees that have made Silicon Valley possible in the first place?

        • by scamper_22 (1073470) on Thursday June 30, 2011 @11:24AM (#36623204)

          I suppose you really believe nothing would get done without state financed universities.

          History says others. Thomas Edison worked part time as a clerk to fund his research. Henry Ford worked his way up from machinist to create Ford.

          Things would get done without state financed things.

          However, let's not argue that point. Whenever you get into these discussions with liberals they talk about the small things the government does that anyone, but the most libertarian minded person would say is a role of government (infrastructure, legal, defence, basic research).

          Yet, how much of your tax dollars are actually used productively in these areas? Emphasis on the world productively here.

          For every dollar of real law enforcement, there is probably 3 spend on unproductive things like the war on drugs and frivolous traffic schemes and other frivolous regulations.

          For every dollar spent on actual national defense, 10 is spent on unneeded wars, big equipment, world policing.

          For every dollar spent on university R&D, 10 is spent on inflated public sector salaries, pensions, frivolous degrees, pumping people through the university system who really have no place being there. ... ... ...

          We could do everything we *need* government to do with 10% tax rate.

          • by geekoid (135745)

            "Yet, how much of your tax dollars are actually used productively in these areas?"
            a considerable amount, actually. You might want to read up, the records are public.

            "For every dollar of real law enforcement, there is probably 3 spend on unproductive things like the war on drugs and frivolous traffic schemes and other frivolous regulations."

            Ah, so you get to define whats productive and not? Productivity is measured against waste, and contrary to opinion, the government doesn't actually waste a lot of money.

          • by dwpro (520418)

            I suppose you really believe nothing would get done without state financed universities.

            I suppose you really believe that your straw man argument against universities has a place in the discussion.

            History says others. Thomas Edison worked part time as a clerk to fund his research. Henry Ford worked his way up from machinist to create Ford.

            Evidence of folks overcoming adversity is not evidence against universities providing a useful and productive place in society.

            [tedious argument that governments are inefficient based on random made-up statistics]

            Governments are inefficient, you are right, but to pretend that the private sector has a better solution waiting in the wings is unproven, especially for the sectors you mentioned (and I would definitely include at least basic education to be in the purview of government). I

      • by poity (465672)

        I'm not going to support the silly besmirching of political leanings by you or the gp, but it does seem like the legislature is doing this not out of a sincere desire to make sure essential services are kept running, but because they're scared of the potential backlash if they make the hard choice that would balance the budget. Roads, street lights, defense are all paid for with other taxes (gas, property, income), whereas this sales tax mostly helps to maintain discretionary spending (i.e. vote-bribing fun

    • by jpapon (1877296)
      How does imposing a tax have a net effect of reducing economic activity? Do you think the money that is taxed leaves the economy?

      Look at it this way; the U.S. government currently runs a deficit, so for every dollar it receives in revenue, it spends more then a dollar. In other words, taxation acts as a multiplier, since the government spends all (and more) of the revenue it takes in.

      Besides that, taxes are necessary to provide services that the private sector cannot provide well for various reasons; he

      • by Artraze (600366)

        You could read part of the story here:
        http://en.wikipedia.org/wiki/Broken_window_fallacy [wikipedia.org]

        Simply put though, just because tax money hasn't "left" the economy doesn't mean that it's being put to good use. I could buy a gallon of gas and burn it in my back yard rather than in my car and the same amount of energy would be released, but in the former case it wouldn't be doing anything. Similarly, there are all kinds of ways that you can circulate money without doing anything useful. Hell, you can use it do jus

    • by Anonymous Coward on Thursday June 30, 2011 @09:06AM (#36621564)

      I just want to know why it is that when times are tough everyone except the government is expected to make due with less. Why don't politicians have to share in the hardship?

      If you think that social security is too large, say that you think that the poor should make due with less. If you think that military spending is too large, say that you think we should bring the troops home. If you think that we spend too much on public infrastructure, say that the government should spend less money building roads, etc... All of those are valid views. However, realize that in none of those cases it isn't the government whose life is affected as government isn't any single entity separate from the people, neither does the government have feelings or a soul.

      There is no such thing as attacking "government spending" even though certain people would like to make government appear as a faceless opponent that takes money away from the hard working people and burns it. When you say that government should do with less, you should specify which of the services that the government provides for people should be cut. When you speak about government as it would be a separate entity with goals, motivations, feelings, ability to make sacrifices, etc. I get the same feeling I get when I hear a paranoid person talking about "them". It doesn't make any sense as there isn't such a creature called "government" any more than there is "them". There is just a list of services that the democratic society has decided to provide to the people, the employees needed to provide them and the taxes that have democratically been set in order to provide those services. That being the case, attack the services, not the government.

    • by chemicaldave (1776600) on Thursday June 30, 2011 @09:31AM (#36621826)

      Why don't liberals seem to understand that imposing a tax has a net effect of reducing economic activity?

      Because that's a falsehood repeated over and over by the right-wing. There is a mountain of historical data that shows a correlation between high tax rates and GDP growth. Just google "historical tax rates vs GDP growth" The results may surprise you. Increasing taxes on big business actually increases economic activity because you force people to reinvest in their business as opposed to just pocketing the money as income. Yes, unemployment is very high, but that hasn't stopped businesses from being profitable. If the economy is so bad, why are stock indexes back to prerecession levels? The Dow-Jones average is back to where it was at the beginning of 2007. NASDAQ has rebounded as well. S&P500 is back up.

      When times are tough, the government does expect "everyone" to make due with less, they expect those can afford to, to make due with less.

    • Good one, Governor Moonbeam! You just killed the revenue stream of roughly 25k Amazon affiliates. So instead of just being content with the revenue collected from the income tax of those affiliates, you decide to double-dip and tax not only the income earned by the affiliate but the transaction as well. Instead of allowing you to double-dip, Amazon pulls the plug on their affiliate program in CA and your projected $200+M tax revenue increase goes up in smoke.

      Well, no. First, the $200M isn't just from Amazon

  • All a game (Score:4, Insightful)

    by inthealpine (1337881) on Thursday June 30, 2011 @08:45AM (#36621370)
    This is all a game between companies and the government (state and federal). CA has no money because they are stupid and elect individuals who spend it faster than it can be earned. The idea CA has is to tap revenue from outside the state, which is of course illegal since CA is not our central government.
    The federal government is playing the same games since they are out of money (which is funny when you think that they are the ones with a printing press), but that's why you see Obama saying bad things about ATMs and Jets my guess being that ATMs and jets don't pay taxes.

    All of this comes down to one thing, spending. Assuming you are not checking your bank account to see if your SS check was direct deposited into your checking account, the US will be at 200% GDP vs debt in our lifetime. That means that if every single American got a second full time job and paid all money from both jobs to the government then we could pay for our spending. As it stand now if we took all the money, 100%, from the top earners in the US FOREVER we still would never pay our debt off at the rate our spending is increasing.
    Spending. Spending. Spending. Until we realize spending is the problem, the problems will continue.
    • by radl33t (900691)
      *Neglecting 30 years of revenue cuts, of course.
    • by Anonymous Coward on Thursday June 30, 2011 @10:58AM (#36622920)

      Sorry, spending by the legislature is not CA's problem. Actually, there are many interrelated problems, many of which are a result of Prop 13.
      1. Property taxes, which are a generally stable source of income are limited to the point of insignificance. This was sold as a way to protect grandma, but the real beneficiaries are big corps like chevron who are still sitting on the same land they were when it passed. Because property taxes cannot be touched, we have to rely on income and sales taxes, which are inherently unstable and obviously tank when you need them most.
      2. Ballot box budgeting, has tied the hands of our legislature for quite some time. We keep passing laws specifying where and how much money must be spent, but without any regard to where the money comes from or to whether there is, in fact, any money to spend.
      3. Prop 13 also raised the bar on tax increases to the point where it is virtually impossible to raise taxes at all. It used to be, if the budget stayed within 5% of the previous year's budget, it could be passed with a majority vote. If the budget grew or shrank too much, a super majority was needed. This seems quite logical and effective to me.
      4. We pass stupid laws that dramatically increase our prison population without considering the financial impact of housing them.

      There are many reasons why CA is in the shape that it is in. Raising taxes and cutting spending are only stop gap measures for what is really needed. The only way CA is going to get out of the shape it's in is to hold a Constitutional Convention. We need to gut and rewrite it in such a way as to be fair, effective and quite a bit more strict as to how it is modified.

      • by demonbug (309515)

        Sorry, spending by the legislature is not CA's problem. Actually, there are many interrelated problems, many of which are a result of Prop 13.
        1. Property taxes, which are a generally stable source of income are limited to the point of insignificance. This was sold as a way to protect grandma, but the real beneficiaries are big corps like chevron who are still sitting on the same land they were when it passed. Because property taxes cannot be touched, we have to rely on income and sales taxes, which are inherently unstable and obviously tank when you need them most.
        2. Ballot box budgeting, has tied the hands of our legislature for quite some time. We keep passing laws specifying where and how much money must be spent, but without any regard to where the money comes from or to whether there is, in fact, any money to spend.
        3. Prop 13 also raised the bar on tax increases to the point where it is virtually impossible to raise taxes at all. It used to be, if the budget stayed within 5% of the previous year's budget, it could be passed with a majority vote. If the budget grew or shrank too much, a super majority was needed. This seems quite logical and effective to me.
        4. We pass stupid laws that dramatically increase our prison population without considering the financial impact of housing them.

        There are many reasons why CA is in the shape that it is in. Raising taxes and cutting spending are only stop gap measures for what is really needed. The only way CA is going to get out of the shape it's in is to hold a Constitutional Convention. We need to gut and rewrite it in such a way as to be fair, effective and quite a bit more strict as to how it is modified.

        I don't completely disagree, but a higher reliance on property taxes would certainly not be helping the situation now. In case you haven't noticed, in most parts of California property values have taken a big dump the last couple of years. There would be a massive hole in the budget no matter what is getting taxed at this point.

  • I've said it before and I'll say it AGAIN:

    Tax the shipping companies and you wouldn't have all these problems!!!

    Tell you what, politicians are terrible at looking "outside the box" for solutions.

  • by dougman (908) on Thursday June 30, 2011 @10:07AM (#36622232)

    "Amazon Drops California Associates to Avoid Sales Tax"

    Should read:

    Amazon Drops California Associates to Avoid COLLECTING Sales Tax ON BEHALF OF A GREEDY STATE GOVERNMENT.

    Option 1: Amazon should spend millions of dollars on programmers, accountants, tax compliance attorneys, and so forth so that they can continue paying commissions to 25,000 affiliates (many of whom do report their income and provide taxes to the state of CA).

    Option 2: Find affiliates in states that are friendly and don't employ mob-style tactics. When will these pols get it? There is not an endless supply of OPM (other people's money).

  • by will_die (586523) on Thursday June 30, 2011 @10:45AM (#36622760) Homepage
    The law requires that they must collect taxes if they or a subsidiary are in California.
    Amazon has two research labs in CA, the first does work on searches the second did the design work on the Kindle and is rumored to be working the new Kindle and the upcoming Android based tablet.
    So Amazon may be willing to not fight for the associate program but will probably fight to kill the law to protect themselves and keep theses two subsidiaries.
  • by salesgeek (263995) on Thursday June 30, 2011 @02:44PM (#36625820) Homepage

    After reading a few comments, most of the people here don't understand this law very well. What California did is redefine what being located in California means to:

    • If you use California contractors for marketing purposes (affiliates), you are located in California. Since you are located in California, you have to collect sale tax for us.

    If California were more creative, they should have tried defining a nexus as anyone who uses a shipping service with warehouses and vehicle depots in the state of California. Fedex or UPS could not have pulled out as easily under this condition.

    So, Amazon fired the California contractors. Now they aren't located in California any more. Stupid law gets equally mind numbing response. Amazon pulls out, and their affiliates, some of which are very large web publishers, will have to forgo participating in Amazon's affiliate program or will have to move out of California to protect their income from their Amazon affiliate programs.

    What California did is try to make an end run on the US Constitution and a recent supreme court decision that said requiring out of state merchants to pay sales tax was an attempt to regulate intrastate commerce, a power that is exclusively delegated to the Federal Governement. The basic reason for this is to prevent trade wars between the states over tariffs, duties and exclusionary laws. Fortunately, California has inadvertently aimed it's cannon at it's own foot and fired a round of grapeshot: By attempting to regulate Amazon, California affiliates now will have to leave the state to continue doing business.

    A lot of people seem to think somehow Amazon was ducking an obligation to pay sales tax. This is simply wrong. The buyer pays sales tax. The seller only acts as an agent in collecting it (in most states, the seller actually gets to keep a cut of the sales tax). The only way for Amazon to duck sales tax is to not pay sales tax on their taxable purchases.

    Some people think that affiliates are not reporting their taxes. Some less intelligent affiliates my not report their income, but most will because Amazon reports your Affiliate income to the IRS, so if you fail to report your affiliate income, you are likely to get into trouble.

    A few people see the mail order sales tax issue as one of being fair to local merchants. As it sits, mail order merchants in California can sell to every other state and protectorate without having to collect sales tax on those sales, just like an Indiana retailer doesn't have to collect sales tax for a sale shipped to California. It's actually pretty fair to everyone except huge companies that do have actual locations in every state.

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