May 6, 2011, 10:44 AM

Connecticut governor signs an “Amazon tax” law

As of July 1, retailers with in-state web affiliates must collect tax.

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Connecticut this week became the sixth state with an “Amazon tax” law that requires Internet retailers to collect and remit sales tax if they generate sales through in-state web site affiliates.

The Connecticut law covers more retailers than the laws in other states, because it has a lower sales threshold, says Daniel Schibley, a state tax expert at CCH Inc., a unit of Wolters Kluwer that publishes tax and business information.

Connecticut will require sales tax collection by all retailers who receive more than $2,000 per year in sales from affiliate web sites based in the state. Other states have higher thresholds. Arkansas, for example, last month passed a law that sets the threshold at over $10,000 a year in sales from affiliate web sites.

The four other states with “Amazon tax” laws—so-called because of the significant impact they have on Amazon.com Inc.—are New York, North Carolina, Rhode Island and Illinois. Amazon, No. 1 in the Internet Retailer Top 500 Guide, is challenging the New York law in court and has terminated its business ties with affiliates in the three other states.

Nine other states are considering similar laws, Schibley notes. Those states are Arizona, California, Hawaii, Massachusetts, Missouri, Minnesota, Tennessee, Texas and Vermont.

Connecticut Gov. Dannel Malloy, a Democrat, on Wednesday signed Senate Bill 1239, which had been introduced in the state Senate by Donald Williams, the Senate president. A companion bill had been introduced in the House by Rep. Christopher Donovan, the speaker of the House. Both Williams and Donovan are Democrats.

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