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Net Sales Tax Prompts Amazon to Cut Off Colorado, More States Could Follow

by Terrence O'Brien on March 9, 2010 at 03:15 PM

Right now, there are a bunch of angry former Amazon Affiliate program members in Colorado. A new law signed by the state's governor Bill Ritter would require Amazon to pay sales taxes if its affiliates, meaning Web sites and bloggers who refer purchasers to them, are based in the state. In response, Amazon discontinued its program, leaving thousands of affiliates -- many of whom rely on the referral fees for income -- with little recourse but to complain to their elected officials.

This is not the first time that Amazon has been compelled by states to collect sales taxes. In 2008, New York began requiring the online retailer to pay taxes, but, likely due to the market's size, Amazon kept the affiliate program in place. North Carolina and Rhode Island passed similar laws which caused Amazon to pull the plug on affiliates there.

Other states, including California, Illinois, Iowa, Maryland, New Mexico, Vermont and Virginia, are considering leveling taxes against online retailers that "target" their residents. They argue that the sites deprive the states of revenue and have an unfair competitive advantage. Current tax laws usually require that a retailer have offices or warehouses in a state for it to level sales taxes, which was upheld by a 1992 Supreme Court ruling, but many states facing steep financial deficits are looking to these so-called "Amazon Taxes" as a way to boost revenue.

Amazon has shown that it has no issue with cutting off states that attempt to force it to collect sales taxes, exposing a fatal flaw in plans to milk the company for additional funds. Amazon does not live or die by its affiliate programs, but its affiliates do. Attempts to force Amazon to collect taxes end up punishing residents, not the retailer. [From: CNET]

Tags: amazon, colorado, law, taxes, top

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