Amazon cuts ties with affiliates in Connecticut, and how Jeff Bezos thinks about the sales tax issue

Amazon.com is shutting down its affiliate program in Connecticut, a move that comes after the state legislature passed a bill to institute an online sales tax. It is the latest dust-up in the Seattle online retailer’s ongoing fight with states over the collection of sales tax, an issue that certainly was on the minds of investors at Amazon.com’s annual shareholders meeting this week in Seattle. (More on that below).

The Danbury News Times reports that Amazon affiliates in Connecticut — small Web site owners which earn referral fees for linking to Amazon.com products — received an email this week titled “Notice of Contract Termination Due to New Connecticut Law.”

“Unfortunately, the budget signed by Governor Malloy contains a sales tax provision that compels us to terminate this program for Connecticut-based participants effective immediately,” the email says. “It specifically imposes the collection of taxes from consumers on sales by online retailers — including but not limited to those referred by Connecticut-based affiliates like you — even if those retailers have no physical presence in the state.”

The issue has been a controversial one for Amazon.com, with the company facing other tax battles in states such as Tennessee, South Carolina, California and Texas. Amazon.com pulled out of Illinois in March. And it not alone in its fight. Overstock.com just pulled out of Connecticut last month over similar issues, according to TechCrunch.

At the Amazon.com shareholders’ meeting earlier this week in Seattle, several investors asked about the tax issues. Here’s how Amazon.com founder Jeff Bezos responded to one of the questions:

“The right solution to sales tax in my view, and certainly this is Amazon’s position and its been consistent and we’ve had this position for 10 years, is that the right place to solve this is federal legislation. … There is an initiative called the simplified sales tax initiative. 22 states have already signed on. That legislation needs to get passed. I believe that will happen in the time frame that you laid out. I hope it happens much sooner than that. I think it is the right thing to do and it would be great for Amazon. By the way … keep in mind — in more than half of the geographies where we do business in certain states as well as Europe and Asia, altogether, more than half of our business is in jurisdictions where we already collect sales tax or its equivalent, like the value-added tax. Our position on this hasn’t changed. We think our position is a good one, and we will stick to that.”

John Cook is co-founder of GeekWire. Follow on Twitter: @geekwirenews and Facebook.

  • http://twitter.com/Vroo Vroo (Bruce Leban)

    Bezos talks about “the right solution to sales tax” but doesn’t say what the problem is. The problem is that his customers are evading sales taxes and Amazon is helping them. What does federal legislation have to do with that?

    • Guest

      That’s a facile argument, Bruce. Amazon is no more complicit in tax evasion than Nissan is complicit in its customers speeding. If citizens are expected to pay use tax on purchases made out of state, then the state in which they reside must compel said citizens to pay use tax.

      Simply stated, Bruce, the problem of use tax avoidance exists between states and taxpayers. Amazon is not a party to this discussion.

  • http://www.hasoffers.com Peter Hamilton

    regularly updated info on the nexus tax issue -> http://performancemarketingassociation.com/nexus-tax

  • http://soapboxblogger.com Eric

    I was one of those Amazon affiliates. I posted the email I received from Amazon at my blog:
    http://soapboxblogger.com/686/amazon-says-budget-signed-by-governor-malloy-is-unconstitutional-and-counterproductive/

  • http://twitter.com/ohmohm ohmohm

    To consider Henry George ‘s Land Value Tax instead of consumption tax ( regressive tax ).

  • http://twitter.com/ohmohm ohmohm

    To consider Henry George ‘s Land Value Tax instead of consumption tax ( regressive tax ).