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Online retailer Overstock.com has followed Amazon.com's decision to cut off a commission program to North Carolina-based Web sites.
The move would allow the companies to avoid having to collect sales tax on sales to customers in the state. Under the commission programs, the online companies pay a percentage to Web sites that steer buyers to the online product.
A proposal in the state legislature would use the commission arrangement to justify levying sales tax on Internet purchases. State law already requires North Carolinians to pay such a tax, but taxpayers have to report themselves. Few do.
The tax proposal would treat online retailers as if they operated a brick-and-mortar store in the state.
Overstock has also cancelled its affiliate programs in Hawaii and Rhode Island, which are considering similar programs. It reinstated the program in California after Gov. Arnold Schwarzenegger vetoed a similar proposal.
“It's painful to have to terminate these relationships with affiliates, simply because they live in states where counterproductive (and likely unconstitutional) laws are being passed,” Patrick Byrne, chairman and chief executive officer of Overstock.com, said in a news release.
“However, politicians have to remember that a tax is a price that government charges for a service, and when they raise their prices, we're going to buy less of their services.”
The commissions can prove lucrative for Web site owners, some of whom live off the money.
Lawmakers who support the proposal say it's only fair to require online retailers who makes sales in the state to collect sales tax.
