Overstock.com Inc. informed its marketing affiliates in four states — California, Hawaii, North Carolina and Rhode Island — that it is ending its business with them to avoid collecting sales tax.
Lawmakers in the 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.
Rival Amazon.com Inc. has taken similar steps in the past few days, ending ties with affiliates in three of the same states and warning about California.
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.
Chief Executive Patrick Byrne said Overstock plans to sever its affiliate relationships in each state that appears close to passage of similar laws, but will reinstate its businesses if the laws are found unconstitutional, vetoed or repealed.
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.
Photo by Overstock.