Cage Match: Amazon vs. Rhode Island
By Peter | July 3rd, 2009Rhode Island doesn’t get a lot of press. It’s right up there with Delaware and South Dakota on the where-the-hell-is-that list. But in a move destined to get them some much-needed attention, the government of Rhode Island decided to take on Amazon, and other web retailers, over the issue of sales tax. Namely, the issue that online retailers never actually collect any tax, or, even worse, ever deliver any of said sales tax into the state coffers. So Rhode Island, and a number of other states, decided to fight back. They introduced legislation that, if passed, will make it law that online retailers will have to collect sales tax if that retailer operates any affiliates (i.e. small businesses that make some of their money by referring customers to Amazon, etc.) within the state.

According to an article posted today on AOL news, Amazon immediately fired back….by closing down all affiliate operations in any of the battleground states. What that means is a whole bunch of small businesses in the affected states suddenly losing a big source of their revenue. And, ironically, that could mean a loss of some tax base for those state governments, as those small businesses shut down or move to a friendlier state.
So far, the governments of New York, Hawaii and North Carolina have joined Rhode Island in introducing similar legislation. And other online retailers, like Overstock, have followed Amazon’s lead by suspending all connections with any affiliates, or at least threatening to, in those four states. From the look of it, this is only the first attack and counter-attack in what is likely to be another protracted battle over the contentious issue of online retailers and sales tax. But, even if nothing has been solved so far, at least it gets people talking about Rhode Island.



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