Amazon.com ends commission program in RI

PROVIDENCE—Amazon.com has cut ties with Rhode Island Web sites that make referrals to the online retailer because a law designed to collect sales taxes on those transactions will soon come into force, The Providence Journal reported Tuesday.

Seattle-based Amazon wrote to Rhode Island Web site operators, telling them its “Associates program” ended Monday. Web sites that posted links to the company about its products have received up to a 15 percent cut on sales.

On June 17, the Rhode Island Legislature passed a budget provision that would force Amazon to collect 7 percent in sales taxes on these so-called “click-through” transactions.

Amazon argues the law is unconstitutional, so eliminating the commission would prevent the company from having to collect the sales tax most consumers pay on purchases at in-state stores.

Rhode Island taxpayers currently must pay sales taxes for out-of-state purchases on their annual tax return, but it’s an honor system.

Amazon spokeswoman Patty Smith did not immediately respond to an Associated Press e-mail seeking comment Tuesday.

She told the Providence Journal on Monday that “the government in Rhode Island is attempting to go about tax collection in what we feel is an unconstitutional manner.“

Amazon’s decision will have no immediate effect on Rhode Island’s revenues because the state didn’t project any new tax income immediately, according to House Finance Committee chairman Steven M. Costantino.

Amazon’s announcement is the latest in a legal fight involving states trying to get out-of-state companies that perform commerce largely online with their residents but have little or no physical presence in the state to collect taxes.

The stakes are large. Governments could generate $3 billion in new revenues if Web retailers had to collect taxes on all sales to consumers, according to Forrester Research.

Amazon sued New York in 2008 over a law similar to what Rhode Island lawmakers passed because it argued it unlawfully imposes tax-collection obligations on out-of-state entities. A trial court judge dismissed the case in January.

“It should be noted that while Amazon is fighting this measure in New York, they have not stopped doing business with the affiliates in New York state,“ Gov. Don Carcieri’s spokeswoman, Amy Kempe, said.

On Friday, Amazon pulled the plug on commissions for North Carolina Web sites because a similar law could soon be enacted.

The company currently collects sales taxes from customers in states in which Amazon has a bona fide physical presence, including Washington, Kentucky and Kansas.