Both Amazon.com and Overstock.com have stopped using affiliate Web sites in three states that have passed laws requiring sales tax to be collected on Internet sales if companies have local affiliate partners.

This week, both companies stopped using affiliate sites based in Hawaii, North Carolina and Rhode Island. The affiliates typically collect a slice of revenue from any sales made by Amazon or Overstock on purchases by customers who were referred by the affiliate sites.

Amazon and Overstock have also threatened to drop affiliates in California if the state passes a law that would also charge sales tax there to close its huge budget gap. But Overstock relented after California Governor Arnold Schwarzenegger said he would not sign such a law.

“We couldn't be more pleased to have been directly told that the governor is going to focus on balancing the budget via cost cutting, and not by jamming consumers and small businesses with new taxes,” said Overstock.com chairman and CEO Patrick Byrne in a statement.


Rhode Island’s new law has taken effect, Byrne noted, while North Carolina and Hawaii have passed legislation, but those states’ governors have not yet signed them into law. “If those states follow Governor Schwarzenegger’s lead, then Overstock.com intends to restart the advertising feeds from its affiliate advertisers based in those states,” he said.


Hawaii Governor Linda Lingle has vetoed the e-commerce tax bill in her state, so Overstock is likely to reinstate the affiliates there.

New York has also recently passed a law that would tax e-commerce sales. Both Amazon and Overstock have sued New York when the state included the tax in its budget. They lost the first round of the lawsuit, but have appealed the decision.

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