Amazon Cuts “Associates” over Sales Tax Legislation

Bloomberg reports that is cutting ties to associates in states that are moving to up the sales tax ante.

The story is a little murky, but it appears to involve blog and web ads on third party sites.

I think this is what is going on: Say I have a blog in North Carolina. Someone visits my blog and sees an ad for an Amazon product and clicks through to the Amazon mothership in Seattle. North Carolina wants a piece of the pie, not because I live in North Carolina (I don’t), but because the ad I clicked on was in North Carolina.

Amazon thinks this is probably unconstitutional. I suspect they have a case. It’s like North Carolina’s charging me sales tax me for buying something because I happened to see it advertised on a billboard in North Carolina.

The full story is here.

Another take, that’s a little clearer on how the proposal works, is here. The second source confirms that the state wants to define a blog ad as a “physical presence” in the state (even though the blog ad is probably hosted on a server somewhere else entirely, maybe even in another country, and just embedded from afar).

Afterthought: It looks to me that, under this approach, if I lived in a sales tax state other than North Carolina, a retailer might be forced to collect and I might have to pay sales tax for both North Carolina and for my state of residence.

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