Amazon.com affiliates cut off to avoid tax

July 1, 6:08 PMDes Moines Internet ExaminerRobert Anhalt

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Most people that shop online do so for (at least) one thing: no sales tax. Exclusive online stores have the benefit of not having to require sales tax in a state as long as they don't operate out of it. Having one giant (or not) location in, say, California is great for all the customers that don't live in California. Regardless of online stores not operating out of certain states, state governments are slowly changing laws to require sales tax anyway. With many state budgets down the tubes, they're furiously looking for any source of revenue. Because the existing law can't be circumvented to get sales tax out of online retailers, states like North Carolina are going for the next best thing, in-state affiliates.

Affiliates are individuals/organizations that create an account with websites like Amazon.com to promote certain items for their audience. For example, a university instructor may link to the required course reading using their affiliate ID, associating student purchases of those books with the instructor's account. Because the instructor facilitated the sale, they get a small cut of Amazon's money. Some states are considering this an in-state purchase, counting people like the instructor as a local retailer. Amazon would then have to collect sales tax from the purchase and send it to the state.

Just last week, North Carolina introduced a bill that would require online retailers to collect sales tax from affiliates. In anticipation of this passing, Amazon has cut off their North Carolina affiliates. Just days later, Amazon also cut off Hawaii partners for the same reason. In an e-mail sent to their now-former partners, Amazon had this to say: "In the event that North Carolina repeals this tax collection scheme, we would certainly be happy to re-open our Associates program to North Carolina residents."

Several states are in the process of adopting such laws, but only one has succeed in getting money from Amazon. New York has passed an Internet sales tax law, requiring Amazon to collect sales tax on its sales, meaning their 3,400 affiliates are also cut off from the program. More laws like these could spell the end of online shopping. Is it really worth upsetting constituents?