June 13, 2011, 5:27 PM

Amazon cuts off affiliates in Arkansas and Connecticut

To avoid the states’ sales tax laws, Amazon has nixed its affiliate ties.

Paul Demery

Managing Editor, B2B E-commerce

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Amazon.com Inc. last week said it was terminating its program of paying commissions on customers it receives through affiliate web sites in Arkansas and Connecticut, where recently enacted laws require online retailers to collect sales tax from state residents if the retailers do business with web affiliates based in those states.

Amazon.com, No. 1 in the Internet Retailer Top 500 Guide, contends the state laws are unconstitutional and go against federal law that says states can only require retailers to collect sales tax if they have an in-state physical presence. Arkansas and Connecticut have joined other states in contending that web affiliates constitute a physical presence.

Amazon announced the terminated programs in letters to affiliates in Arkansas and Connecticut.

"We opposed this new tax law because it is unconstitutional and counterproductive,” Amazon wrote in a letter to Arkansas affiliates, mirroring language in a letter to Connecticut affiliates. “It was supported by big-box retailers that seek to harm the affiliate advertising programs of their competitors. Similar legislation in other states has led to job and income losses, and little, if any, new tax revenue.”

Amazon.com will terminate relationships with Arkansas affiliates on July 14. It cut ties with Connecticut affiliates June 10.

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