That's not what happened. California passed a law to collect sales tax from all online retailers shipping to California addresses. Amazon fought it, but eventually gave in. Amazon received tax breaks from the state to open several distribution centers in California.
You don't need to restore your phone to get it working again. Download iOS 8, hook up your iPhone to iTunes, turn off Find My iPhone, hold down the Option key and select check for update. You then select the iOS 8 file you downloaded. Your phone is back working again in under 5 minutes.