Amazon: associates program in California to be terminated (Update: Gov. signs tax law)

Amazon announced today that its Associates program is to be terminated in California, in response to a new sales tax bill there. The move appears to be pre-emptive hardball to try and avert the bill being signed into law. UPDATE: Gov. Jerry Brown has signed the law. Here's the text of an open letter mailed to associates:
Hello, For well over a decade, the Amazon Associates Program has worked with thousands of California residents. Unfortunately, a potential new law that may be signed by Governor Brown compels us to terminate this program for California-based participants. It specifically imposes the collection of taxes from consumers on sales by online retailers - including but not limited to those referred by California-based marketing affiliates like you - even if those retailers have no physical presence in the state. 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. We will send a follow-up notice to you confirming the termination date if the California law is enacted. In the event that the California law does not become effective before September 30, 2011, we withdraw this notice. As of the termination date, California residents will no longer receive advertising fees for sales referred to Amazon.com, Endless.com, MYHABIT.COM or SmallParts.com. Please be assured that all qualifying advertising fees earned on or before the termination date will be processed and paid in full in accordance with the regular payment schedule. You are receiving this email because our records indicate that you are a resident of California. If you are not currently a resident of California, or if you are relocating to another state in the near future, you can manage the details of your Associates account here. And if you relocate to another state in the near future please contact us for reinstatement into the Amazon Associates Program. To avoid confusion, we would like to clarify that this development will only impact our ability to offer the Associates Program to California residents and will not affect their ability to purchase from Amazon.com, Endless.com, MYHABIT.COM or SmallParts.com. We have enjoyed working with you and other California-based participants in the Amazon Associates Program and, if this situation is rectified, would very much welcome the opportunity to re-open our Associates Program to California residents. We are also working on alternative ways to help California residents monetize their websites and we will be sure to contact you when these become available. Regards, The Amazon Associates Team
The move follows similar shutdowns in other states, most recently Arkansas and Connecticut, where similar laws have been enacted. A similar bill is under consideration in Tennessee. California, however, is by far the largest U.S. state and represents an enormous revenue source for Amazon and associates. Headquartered in Seattle, Wa., Amazon says it should not have to collect sales tax in states where it has no physical presence. States want a cut of sales with a local connection, however, and Amazon's associates system blurs the location of economic activity in a way that looks mighty fat to the taxman. Who is making the sale? Where does the sale occur? And so on. Amazon chief Jeff Bezos has called for federal legislation that determines the issue once and for all.