New tax collection forces Amazon to shut its operations

Online retailer Amazon.com is shutting its Internet associates program in Rhode Island due to an "unconstitutional tax collection scheme" passed by the General Assembly.

Besides, last week, Amazon closed its associates program in North Carolina and sent a letter to California lawmakers, warning them that a similar bill introduced in that state's Assembly would force Amazon to end its program in the wealthiest U.S. state. Thus, in January, Amazon brought a lawsuit that challenged the New York law, but a judge threw it out. Litigation is still pending and Amazon is still operating its New York associates program.

Through Amazon's "Associates Program," the company pays unaffiliated Web site operators across the country a commission if they advertise Amazon on their sites. Those ads often allow consumers to click through from the advertiser's Web site to Amazon.com. 
According to Forrester Research Inc analyst Sucharita Mulpuru`s estimations, 10 percent of Amazon's sales could come from associates -- although much of that could be from margin-eroding coupon sites. And associates can earn up to 15 percent of a product sale, though fees vary by product category, says Patty Smith, Amazon spokeswoman.

Smith also added that other states, including Hawaii and Connecticut, are considering a similar tax collection option.