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Amazon Retaliates Against Colorado

by Mike Godfrey, Tax-News.com, Washington
11 March 2010

Amazon.com cut ties with its Colorado affiliate marketers on March 8 after the US State forged ahead with its plan to introduce a mandatory Internet sales tax on e-businesses with an annual turnover exceeding USD100,000.

The measure voted on in the state Senate in February 2009, and introduced this month, obliged large providers of goods via the internet, and their marketing affiliates, to transmit sales statistics to the state, so that the Colorado state tax authorities could levy the 2.9% sales tax on purchases by Colorado consumers.

The bill was introduced as a first step to increasing sales tax compliance by Colorado taxpayers using the Internet to purchase items. Colorado is not the first state to implement such a move; authorities elsewhere have been unsuccessful in getting e-commerce giants to automatically levy and remit taxes due.

Initially the bill had been drafted to tax purchases clicked through via affiliate marketers but this was later dropped on the grounds that online retailers such as Amazon and Overstock had cut ties with affiliate marketers in three other states where this was tried.

Despite amending the proposals, Amazon cut its commercial ties with Colorado’s affiliate marketers on March 8, stating in a email to members of its associates program that “as a result of the new law, Amazon has decided to stop advertising through associates based in Colorado."

In response, Colorado authorities condemned the move as a “hostage-taking ploy”, questioning the firm’s reasoning for disbanding its Colorado marketers. "It's blackmail, it's flat-out blackmail," Jack Pommer, a Democrat representing Boulder and author of the original bill, was quoted by the Denver Post as saying.

"It shows the lengths to which they'll go to keep the advantage they have over other local businesses," he retorted.

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