Don't accuse Amazon.com of making empty threats. Just days ago, the online retail giant warned its affiliates in North Carolina that it could end its relationship with them over sales tax legislation in that state. Today, Amazon carried through on that threat, officially cutting off those affiliates because the tax bill in question is poised to pass, according to reports. It's a sign that Amazon is ratcheting up its campaign to prevent cash-strapped states from passing laws that would force the company to collect sales tax on web purchases.
Will Amazon take the same step with California and Hawaii, which are contemplating similar laws? Amazon has already sent warning letters to those states, and others. The online retailer is trying to snuff out efforts by a number of states to follow the lead of New York, which passed a law establishing that Amazon has a physical presence in the state through its relationship with locally based affiliates, and is thus required to collect sales tax on web purchases (affiliates link to Amazon products in exchange for a cut of sales).
How big a threat are these sales tax laws to Amazon? The online retailer right now only collects sales tax in a handful of states, and presumably worries that bargain hunting shoppers would be turned off if they have to pay an unaccustomed tax on web purchases. Some, however, question whether internet sales taxes will make much of a dent in Amazon's ecommerce business.
Update: Here's the full text of the termination email that went out to North Carolina affiliates:
We are writing from the Amazon Associates Program to notify you that your Associates account has been closed as of June 26, 2009. This is a direct result of the unconstitutional tax collection scheme expected to be passed any day now by the North Carolina state legislature (the General Assembly) and signed by the governor. As a result, we will no longer pay any referral fees for customers referred to Amazon.com or Endless.com after June 26. We were forced to take this unfortunate action in anticipation of actual enactment because of uncertainties surrounding the legislation’s effective date.
Please be assured that all qualifying referral fees earned prior to June 26, 2009 will be processed and paid in full in accordance with our regular referral fee schedule. Based on your account closure date of June 26, 2009, any final payments will be paid by September 1, 2009.
In the event that North Carolina repeals this tax collection scheme, we would certainly be happy to re-open our Associates program to North Carolina residents.
The North Carolina General Assembly’s website is http://www.ncleg.net/, and additional information may be obtained from the Performance Marketing Alliance at http://www.performancemarketingalliance.com/.
We have enjoyed working with you and other North Carolina-based participants in the Amazon Associates Program, and wish you all the best in your future.
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