Amazon warns Connecticut lawmakers over sales tax bill
Eric Engleman on Tuesday, March 16, 2010, - TechFlash

Amazon.com is engaged in game of whack-a-mole again, trying to beat down sales tax legislation popping up in various states. The latest skirmish is taking place in Connecticut, where lawmakers are considering a bill that — following a strategy pursued by other states — would make Amazon collect sales tax on purchases just like a physical retailer. But Amazon is warning it will take swift action to dodge the measure if it passes.

The Connecticut bill defines Amazon as having a physical "nexus" in the state based on its ties to local affiliate websites that link to Amazon products. That "nexus" designation requires Amazon to collect sales tax on purchases.

But Amazon Vice President for Global Public Policy Paul Misener, in a March 15 letter to the Finance, Revenue and Bonding Committee of the Connecticut General Assembly (pdf, 2 pages), indicated that Amazon will sever ties with Connecticut affiliates if the measure passes, as it has done or threatened to do in other states. That action would eliminate the basis for any sales tax collection by Amazon.

Misener writes:
    Last year, North Carolina and Rhode Island each enacted a new tax collection scheme functionally identical to the one proposed in Connecticut RB 5481, so Amazon simply ended its advertising relationships with NC- and RI-based participants in the Amazon "Associates program."

Misener didn't mention Colorado, where lawmakers recently passed a different kind of sales tax law. The Colorado law requires that Amazon tell state residents what they owe in sales tax and share that information with the state. While the Colorado law isn't based on the affiliate-nexus argument, Amazon responded by cutting off its Colorado affiliates — sparking criticism from the Colorado governor and others there.
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