Amazon.com ends commission program in NC

RALEIGH, N.C. - Amazon.com said Friday it has pulled the plug on commissions for North Carolina Web sites that make referrals to the online retailer because a law designed to collect sales taxes on these transactions could soon be enacted.

Seattle-based Amazon said it wrote to Web site operators, telling them its "Associates program" will end after Friday. Web sites that posted links to the company about its products have received up to a 15 percent cut on sales.

But the Legislature is considering a provision in its final budget plan designed to collect sales taxes on these so-called "click-through" transactions.

Competing House and Senate plans both contain the provision, so it's likely to be in the compromise budget proposal that could be approved in the next several days.

"We felt that we had to take this step and it's unfortunate," Amazon spokeswoman Patty Smith said of discontinuing the program. "But we feel like we have little choice."

Amazon believes the proposed law would be unconstitutional, so eliminating the commission would prevent the company from having to collect the current 6.75 percent sales tax most consumers pay on purchases at in-state stores.

"In the event that North Carolina repeals this tax collection scheme, we would certainly be happy to reopen our Associates program to North Carolina residents," the e-mail said.

The provision would require companies that have reported more than $10,000 in sales each of the last four quarters through agreements with Web sites making referrals to collect the tax on the state's behalf.

North Carolina expects to collect an additional $13.2 million in the coming fiscal year on the "click-through" transactions and by companies collecting sales taxes on music, video and software downloads purchased electronically, according to a legislative fiscal analysis.

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

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 North Carolina lawmakers are proposing because it argued it unlawfully imposes tax-collection obligations on out-of-state entities. A trial court judge dismissed the case in January.

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