DOW JONES NEWSWIRES
Amazon.com Inc. (AMZN) added Hawaii to the growing list of
states where the e-commerce giant is ending relationships with
marketing affiliates to avoid collecting sales tax.
In the past few days, the company has also ended relationships
with affiliates in North Carolina and Rhode Island and has made
similar threats about California. Affiliates account for a
relatively small slice of Amazon's traffic, so the move isn't
likely to cause major damage to the company's business. It will
continue to sell goods directly to consumers in the states through
its own Web site and will still allow purchases from independent
online merchants that sell through Amazon's site.
In an email sent to Hawaii associates, the company said their
accounts would be closed as of Tuesday. "This is a direct result of
the unconstitutional tax collection scheme passed by the Hawaii
State Legislature with an effective date of July 1," the email
reads.
The decision highlights mounting tensions between online
retailers and cash-strapped states. Other states are considering
similar laws that would use affiliates as a way to force companies
to collect sales taxes for online purchases.
Forcing e-commerce sites to collect tax upfront would strip a
key advantage they have over traditional retailers, though
consumers are technically supposed to pay a so-called use tax for
online purchases on their own.
New York passed an Internet-sales-tax law last year, which
Amazon and Overstock.com Inc. (OSTK) challenged in court but lost.
While they are appealing that ruling, Overstock has dropped its
affiliates in the state and Amazon has begun collecting a sales tax
in New York. Amazon shares were up 14 cents to $83.17 in recent
trading and are up 62% so far this year.
-By Lauren Pollock, Dow Jones Newswires; 212-416-2356;
lauren.pollock@dowjones.com