North Carolina To Impose 'Amazon Tax'

North Carolina has proposed several changes in its tax law to plug a reported $4.7 billion hole in its state budget, according to The News-Record in Greensborough, N.C. The newspaper said that the click-through tax could generate as much as $13.2 million in 2010 and $17.8 million in 2011.

Amazon.com affiliates, or Amazon Associates, can make as much as 15 percent in referrals by advertising Amazon.com's products on their own Web sites. With North Carolina's proposed tax, Amazon -- or any other online retailer -- will have to collect a 4.5 percent sales tax from its Associates.

The company has sent out letters to its North Carolina affiliates apprising them of the proposed change. Here is an excerpt posted on the 3tailer.com blog.

"We regret to inform you that the North Carolina state legislature (the General Assembly) appears ready to enact an unconstitutional tax-collection scheme that would leave Amazon.com little choice but to end its relationships with North Carolina-based Associates."

The letter goes on to say that the termination isn't immediate, and that all referral fees earned on qualified traffic will continue to be paid as planned.

However, Amazon.com said that because the new law is drafted to go into effect once enacted -- which could happen in the next two weeks -- it will have to terminate the participation of all North Carolina residents in the Amazon Associates program on or before that same day.

"After the termination day, we will no longer pay any referral fees for customers referred to Amazon.com or Endless.com nor will we accept new applications for the Associates program from North Carolina residents."

North Carolina follows other states looking to charge what is now being called "Amazon Tax." Other states that are looking to add online tariffs include California, Connecticut, Florida, Hawaii, Illinois, Maryland, Minnesota and Tennessee, according to the blog site 5 Star Affiliates Programs.

In April 2008, New York passed a law requiring that online retailers collect sales tax for the state. The tax would be collected even if the business does not have a physical presence in the state, and includes affiliate marketers living in New York.

The following July, Amazon.com filed suit against the state, calling the law "overly broad and vague." The suit was dismissed in January 2009 by the N.Y. State Supreme Court.