Amazon May Sever Ties With U.S. Affiliates Over Tax Dispute

By Erin Harrison May 18, 2011

In the face of potential tax law changes, Amazon.com could cuts its partnerships with Web operators that collect fees for driving traffic to the online retail giant.

According to a Reuters report, lawmakers in several states, many of which face huge budget deficits, argue that “Amazon has a duty to collect tax because its ‘affiliates,’ or independent Web operators which are paid a fee when they drive traffic to Amazon that results in a sale, operate in the state.”

Amazon Chief Executive Jeff Bezos said this week that Amazon.com could cut its partnership with affiliates in more U.S. states that require the online retailer to collect sales tax.

Bezos told the ShopSmart Shopping Summit in New York this week the online retailer would cut ties with affiliates who pass such laws.

“We will continue to drop states who pass those affiliate laws, from the affiliate program,” Bezos said in the Reuters report.

Earlier this month, Connecticut 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 website affiliates, Internet Retailer reported.

Nine other states are considering similar laws, according to Daniel Schibley, a state tax expert at CCH Inc., which are: Arizona, California, Hawaii, Massachusetts, Missouri, Minnesota, Tennessee, Texas and Vermont.

Bezos argues that his company plays by a different set of rules from bricks-and-mortar retailers that sell goods over the Internet.

“Our point-of-view on this is that we should simplify the sales tax system, and we’ve been insisting on this for 10 years. We support the streamlined sales tax initiative, and 22 states have signed on. The right way to fix this is with federal legislation,” Bezos told Consumer Reports on May 11. “Sales tax is very complicated. We’re no different from big chains of retailers. They don’t collect sales tax in states where they don’t have nexus either. So everyone is following the same rules.”

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Erin Harrison is Executive Editor, Strategic Initiatives, for TMC, where she oversees the company's strategic editorial initiatives, including the launch of several new print and online initiatives. She plays an active role in the print publications and TechZone360, covering IP communications, information technology and other related topics. To read more of Erin's articles, please visit her columnist page.

Edited by Jennifer Russell

Executive Editor, Strategic Initiatives

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