Just days ago, Amazon.com ended its North Carolina affiliate program over sales tax legislation in that state. Now the online retail giant has cut off its Rhode Island affiliates as well. Amazon is fighting efforts by a variety of states to force it to collect sales tax on the basis of its affiliate programs.
Amazon currently collects sales tax in only a handful of states, angering some who say it's taking advantage of a loophole for online retailers. Now a growing number of states, looking to boost revenue in the recession, are looking to classify Amazon as a retailer with a physical presence -- and thus the responsibility to collect sales tax -- through its relationship locally-based affiliates. Affiliates link to Amazon products in exchange for a cut of sales.
Amazon has sent out warning letters to states, including California and Hawaii, that are poised to pass such legislation, and now it's moving ahead with axing affiliate programs, to shield itself from having to collect sales tax.
Here's the text of the letter that went out to Rhode Island affiliates:
We are writing from the Amazon Associates Program to notify you that your Associates account has been closed as of June 29, 2009. This is a direct result of the unconstitutional tax collection scheme passed by the Rhode Island General Assembly with a veto-proof majority. As a result, we will no longer pay any referral fees for customers referred to Amazon.com or Endless.com after June 29. We were forced to take this unfortunate action in anticipation of actual enactment because of uncertainties surrounding the legislation’s effective date. The governor could sign the bill -- or have his veto overridden -- any day now.
Please be assured that all qualifying referral fees earned prior to June 29, 2009 will be processed and paid in full in accordance with our regular referral fee schedule. Based on your account closure date of June 29, 2009, any final payments will be paid by September 1, 2009.
In the event that Rhode Island repeals this tax collection scheme, we would certainly be happy to re-open our Associates program to Rhode Island residents.
Amazon, of course, will continue to sell products in North Carolina and Rhode Island, but the affiliate programs there are toast. While affiliates are a part of Amazon's ecommerce system, it's not clear how much of an impact their absence will have on the online retailer's overall business.
UPDATE: Turns out the Seattle online jewelry retailer Blue Nile has also terminated its affiliate program in North Carolina.
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