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Amazon affiliates nixed in two more states

Rhode Island removed, Hawaii punched

Website security in corporate America

Amazon.com is tearing out two more stars on the American flag to avoid collecting taxes.

The online retailer has dumped marketing affiliates in Hawaii and Rhode Island in protest of the states passing laws that would force Amazon to collect sales taxes from locals.

Amazon's affiliate program pays commissions to website owners who direct buyers to Amazon products. Normally, a store is required to collect a state sales tax only if it has a physical presence in the area. But strapped for cash, many states have followed New York's lead in passing legislation that counts affiliates as near enough to a physical presence to require the tax collection on purchases originating there.

After New York state passed the online levy scheme in 2008, Amazon sued, ,and now begrudgingly plays the tax man.

However, when North Carolina drafted a similar bill this week, Amazon simply pulled the plug on all affiliates located in the state.

Now that Rhode Island and Hawaii are also following suit, Amazon is crossing them out of the program as well. The retailer calls the state laws "unconstitutional," arguing the affiliates program doesn't amount to a physical presence.

Overstock.com took a harder line with New York and began pulling affiliates immediately after the court decision. It's now nixed their program in Rhode Island, North Carolina, and Hawaii too.

The state-by-state showdown could become a much bigger issue now that California is near to joining the sales tax collection drive. Amazon has already hinted its finger is on the trigger. So how about it Golden State, do you feel lucky? Well, do ya, punk? ®

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