The Next Salvo in the Internet Sales Tax War

June 29th, 2009

GovernmentAmazon has an affiliate program where members refer traffic to Amazon for specific products. The members get a percentage of sales made by the referrals. Regular Chad’s News readers will recall that New York state recently decided that an in-state affiliate was sufficient cause to require Amazon to collect state sales taxes on purchases by New York residents. Amazon is challenging this in court as being unconstitutional, but is collecting the tax in the meantime.

Now North Carolina is in the process of changing its tax laws, such that anything purchased through Amazon affiliates in that state would be subject to sales tax. Amazon has preemptively responded to this by shutting down its affiliates in North Carolina. This is an overreaction on the part of Amazon, but the company is very serious about not having to collect sales tax for states in which it doesn’t have a physical presence. State legislatures, however, are reasonably upset over the loss of significant tax revenue to internet retailers. Residents are supposed to voluntarily pay “use taxes” on internet purchases, but that rarely happens.

How this will all end is anyone’s guess. Amazon is up for the fight, however, and the final outcome will be decided in court.

Link #1: http://www.news-record.com/…
(via Slashdot)

Link #2: http://www.news-record.com/…
(via The Consumerist)

Update: Amazon has banned Rhode Island affiliates as well.

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