NCPA - National Center for Policy Analysis


September 22, 2009

Online retailers and recently dropped hundreds of affiliate advertisers in California, Hawaii, North Carolina and Rhode Island in response to new laws that requires Internet retailers to collect state sales taxes if they have local affiliate advertisers, says the Heartland Institute.

  • in June notified Hawaii, North Carolina, and Rhode Island affiliates it would end its affiliate advertising programs in those states.
  • On July 1 sent similar notices to all of its affiliate advertisers in California, Hawaii, North Carolina and Rhode Island.

Patrick Byrne, chairman and chief executive officer of said in a statement: "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."  Out of a total of 327 advertising affiliates dropped by, 279 are in California, four in Hawaii, 37 in North Carolina, and seven in Rhode Island. 

The dispute centers on a U.S. Supreme Court ruling that a company must have a "physical presence" in a state before it can be forced to collect state tax, says Heartland.                            

The consequences of the Internet tax laws are such that:

  • Local Internet ad business in affected states will quickly go dark and the business will simply migrate to other states more friendly to Internet commerce.
  • More local citizens will be put out of work.

Source: Steve Stanek, "Online Retailers Drop More Affiliates Over Internet Taxes," Heartland Institute, September 2009.


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