Amazon cuts off Colo. affiliates because of tax

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Amazon is cutting off affiliates that help it sell products in Colorado because of a new tax on online sales.

Affiliates earn money by using their Web sites to link customers to online sellers like Amazon.

Amazon told affiliates in an e-mail on Monday it would no longer pay them advertising fees because of the new law.

The law says online retailers have to start collecting state sales tax themselves or send annual notices to customers telling them to pay the tax.

Amazon says the law is cumbersome and no other state has similar rules.

Overstock.com has not yet cut off its affiliate program, but officials said it is considering taking action, following Amazon’s decision to cut the program completely.

Affiliates feared the tax would hurt them and lawmakers changed the bill to try to prevent them from being harmed.

Amazon’s move is a “misguided attempt to bully Colorado, said Alec Harris, economist with the Colorado Fiscal Policy Institute, an nonpartisan research and advocacy group.

Harris said the bill was much more moderate than similar legislation in Rhode Island and North Carolina. Colorado’s law only asks Internet retailers to inform customers of their state sales tax obligations when they purchase online products.

While Internet retailers are not obligated to collect sales tax for their customers, customers still are supposed to pay taxes on the products in their states.

“The Colorado ibll specifically avoids affecting affiliate marketing,” Harris said. “Yet Amazon.com has fired its Colorado affiliates. …clearly Amazon.com is simply unhappy about having its customers alerted to the lax legally due on their sales, and is willing to use its Colorado affiliates as hostages in protest.”

Amazon.com also fired its affiliates in North Carolina and Rhode Island, which use an affiliate approach to require out-of-state retailers to collect sales tax on behalf of their customers.

- Associated Press