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cnet news
March 8, 2010
by Declan McCullagh
Jeremy Bray received an e-mail message this morning with an unwelcome surprise: Amazon.com told him it had canceled its affiliate program, which provides small payments for referring customers, for everyone in the state of Colorado.
The reason? A state law, which Democratic Gov. Bill Ritter signed last week, slaps onerous new restrictions on large out-of-state sellers like Amazon, which said it has no choice but to end its marketing program in response.
Bray, a blogger who has lived in Pueblo, Colo., for more than 20 years, told CNET on Monday that he's now trying to "bring as much attention to the issue as possible in hopes of getting Colorado to repeal" the new law.
Colorado is not alone. Fifteen other states have considered or are considering enacting laws targeting Amazon and other e-commerce companies that typically do not charge sales tax for shipments sent outside their home state, according to a report released Monday. Four states including Colorado have already enacted them.
"I see this as a trend moving along--a lot of states are considering doing it," said Joseph Henchman, director of state projects at the non-partisan Tax Foundation in Washington, D.C., which published the report. But, Henchman says, the laws "won't solve short-term budget problems, they signal business-unfriendliness, and they're probably unconstitutional."
The justification for the laws is a reprise of arguments that state tax collectors have made for at least a decade: they claim that Amazon, Overstock.com, Blue Nile, and other online retailers that don't collect taxes are unreasonably depriving states of revenue, and that they enjoy an unfair competitive advantage over local retailers that must collect taxes.
On the other hand, a 1992 Supreme Court ruling says that, in general, retailers can't be forced to collect sales tax on out-of-state shipments unless they have offices in those states.
New York, North Carolina, and Rhode Island have enacted laws saying that if a retailer runs an affiliate program with referral payments, that's enough to trigger tax collection requirements. California, Illinois, Iowa, Maryland, New Mexico, Vermont, and Virginia are among those states with similar measures currently pending; in Virginia, one chamber of the state legislature has approved the bill.
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In response to Amazon's actions, Colorado governor Bill Ritter said:
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Amazon has taken a disappointing - and completely unjustified - step of ending its relationship with associates. While Amazon is blaming a new state law for its action, the fact is that Amazon is simply trying to avoid compliance with Colorado law and is unfairly punishing Colorado businesses in the process.
