DOW JONES NEWSWIRES
Overstock.com Inc. (OSTK) said late Wednesday it reversed its
decision to drop its California-based marketing affiliates after
receiving assurance from Gov. Arnold Schwarzenegger's office the
state's online-tax bill won't become law.
Lawmakers in several states have passed or are preparing to pass
legislation that would require companies to collect sales tax if
they have marketing affiliates in the state. Affiliate marketers
run blogs or Web sites and get a sales commission by featuring
links to outside e-commerce sites.
Following in the footsteps of rival Amazon.com Inc. (AMZN),
Overstock on Wednesday canceled its relationship with affiliates in
California, Hawaii, North Carolina and Rhode Island, before
backtracking on California. Amazon has dropped its affiliates in
three of the states and warned about California.
"We couldn't be more pleased to have been directly told that the
governor is going to focus on balancing the budget via cost
cutting, and not by jamming consumers and small businesses with new
taxes," Overstock Chairman and Chief Executive Patrick Byrne
said.
Hawaii Gov. Linda Lingle also vetoed the online tax bill
Wednesday, saying the legislation has immediate and adverse
consequences for residents and businesses in Hawaii and places them
at a competitive disadvantage. The state legislature has until July
15 to override the governor's veto.
Neither Overstock nor Amazon spokesmen were immediately
available to comment on the veto's impact on their operations in
Hawaii. However, both companies have said they intend to restart
advertising feeds if the legislation doesn't make it into law.
Rhode Island's new law is effective, while North Carolina's
governor has yet to sign the bill.
The controversy highlights mounting tensions between online
retailers and cash-strapped states. 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
Overstock and Amazon 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.
Overstock shares were off 3% at $12.38 in recent trading amid a
broader market drop, while Amazon was down 2.6% at $79.50.
Year-to-date, the shares are up 15% and 55%, respectively.
-By Lauren Pollock, Dow Jones Newswires; 212-416-2356;
lauren.pollock@dowjones.com