Amazon stands firm on sales tax battle, cuts off Connecticut

By on June 13, 2011, 2:00 PM

Amazon.com has cut its ties with its online sales affiliates in Connecticut over a new state law there that would force the ecommerce giant to collect sales taxes on their behalf. The company has made it clear that it will stand its ground against efforts in states to pass the aforementioned law, and Connecticut is just the latest example of that. So far Amazon has cut ties with affiliates in Texas, Colorado, Illinois, Hawaii, North Carolina and Rhode Island.

Currently at least ten other states are at risk of being cut off as well. The measure does not affect customers' ability to purchase items from Amazon, but it means owners of websites affiliated to the giant retailer and other marketers in the state will no longer receive a portion of the sales for funneling customers to Amazon.

The issue revolves around several states' intentions to start collecting sales tax from online transactions. Previously, Amazon has been protected by a U.S. Supreme Court ruling from 1992, which says companies cannot be required to collect sales tax in states where they do not have physical presence. Amazon collects sales tax in Kansas, Kentucky, New York, North Dakota and Washington, the only markets where it has stores or offices, but states want to get around this by expanding the definition of physical presence to include affiliate partners earning commissions.

Amazon CEO Jeff Bezos called the measure unconstitutional and counterproductive because it interferes with interstate commerce, and says the issue highlights the need to simplify the existing sales tax system through federal legislation. Other retailers including Overstock.com have also canceled ad contracts with affiliates rather than collect the tax.

It remains to be seen who will blink first -- cutting ties with affiliate partners means those business won't get checks from Amazon and the drop in revenue will translate into less taxes for the incumbent state. On the other hand, it also means less business for Amazon. A state-by-state look at how Amazon is handling the sales tax issue is available here.




User Comments: 9

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Muggs said:

Amazon should move all operations to Montana since they do not have sales tax and screw the rest of the states. My state NC is currently suing amazon to get information of anyone who purchased from their site. I will hate to see that bill.

Xclusiveitalian Xclusiveitalian said:

Wow can't believe the big business is the good guy and the state is the bad guy.

Wagan8r Wagan8r said:

xclusiveitalian said:

Wow can't believe the big business is the good guy and the state is the bad guy.

You're darn right that the state is the bad guy. It's a double tax; Once for the state from which the item is shipped, and one for the state to which the item is going. Laws like this make it prohibitive for not just the big businesses, but also for Joe Schmoe's online business.

Why are people so brainwashed into thinking that big business is always the bad guy...

gwailo247, TechSpot Chancellor, said:

I don't think it will hurt Amazon that much. I'm sure there will be a loss of people who might have clicked on a affiliate link, but won't go to the trouble of actually navigating to Amazon and entering the price, but if a person wants to get something, its only a bit more effort.

This will just screw over people who rely on this for income, and the resultant income tax drop for the state.

spydercanopus spydercanopus said:

Connecticut, no long Connected

Guest said:

I think that eventually Amazon will have to give in and start collecting sales tax as more and more states demand it (CT, NY, CA, TX, etc)

Of course, consumers won't be happy about paying sales tax, and many are already discovering ways to avoid doing so. For example, many consumers in California and New York use a package forwarding service from Oregon (where there is no state sales tax) to shop tax-free online, even though their states collect sales tax on online purchases. (You just order with an Oregon address, then have your packages forwarded to your own state, tax-free). See http://bit.ly/mRILaE

Guest said:

The tax is for collecting Use Tax, or Sales tax on the consumer. It is not a double tax, as you are charged for the Sales Tax in your State only.

Guest said:

Don't forget the income taxes (federal and maybe state) that you already pay on your wages BEFORE YOU EVEN GET TO SPEND ANY OF IT. Greedy, chickenshit, tax & spend liberals are the root cause. They just gotta get more money to pay for translating everything to spanish.

Guest said:

Connecticut also thinking about pulling all gold teeth in a new death tax.

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