Amazon turns gears of internet tax wars

Internet retailers Blue Nile and Overstock.com have joined the Web's largest retailer in dropping affiliate programs in North Carolina and Rhode Island, according to numerous press reports. Amazon also reportedly dropped its affiliate program in Hawaii.

Affiliate programs allow Web site operators to earn money from product sales by setting up online stores and funneling customers to the parent site.

In all three states, lawmakers are considering or have passed legislation that would require collection of sales tax from customers who purchase from online sites that have affiliate programs in that state. Other states may follow suit as they try to find ways to replace revenue that has evaporated in the recession.

Most states already tax online purchases from sites run by companies that have traditional storefronts in the state, such as Best Buy or Wal-Mart.

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