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Amazon poised to cut affiliate program in Hawaii


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POSTED: Saturday, June 27, 2009

Amazon.com Inc., the largest Internet retailer, may terminate its affiliate program in Hawaii in which state residents with Web sites earn money by linking shoppers with Amazon.com or sister site Endless.com.

Amazon also will collect taxes on e-commerce purchases by Hawaii consumers who go directly to the sites, if Gov. Linda Lingle does not veto House Bill 1405, which seeks to tax out-of-state businesses on business activities in Hawaii.

The company already has cut ties with affiliates in North Carolina, which has drafted similar legislation.

“;This is not a decision we took lightly,”; said Patty Smith, director of corporate communications. “;Given the way the legislation was drafted, we felt we had no choice.”;

The company sent a notice to affiliates, including those in Hawaii, on Thursday night.

North Carolina affiliates were told, “;We will no longer pay any referral fees for customers referred to Amazon.com or Endless.com after June 26 ... We were forced to take this unfortunate action in anticipation of actual enactment because of uncertainties surrounding the legislation's effective date.”;

Amazon.com also is fighting tax proposals in at least five other states, calling the efforts unconstitutional. The company has sent letters to government leaders, though Amazon.com hasn't moved to cut off affiliates, Smith said. The North Carolina legislation posed an immediate threat, she said.

The U.S. Supreme Court ruled that “;it would be an unconstitutional burden on interstate commerce for a state, in this case, Hawaii, to require a seller, Amazon, without a physical presence in the state, to collect sales tax on sales to buyers in that state,”; Smith told the Star-Bulletin.

The bill would affect all e-commerce transactions in Hawaii, not just those through Amazon.com or its sister site.

Gov. Lingle has until Tuesday to notify legislators which bills she will or may veto, said Russell Pang, chief of media relations for the governor's office.

“;If it's not on that list, it will become law with or without her signature,”; he said.

Hawaii affiliates also received notice indicating that since the Hawaii legislation is drafted to take effect Wednesday, Amazon would take steps to terminate the relationships on or before that day.

The company's affiliates program, called Amazon Associates, started in 1996. It lets Web-site owners and bloggers make money by posting ads for Amazon.com products. If someone clicks through and buys something at Amazon.com's main store or its Endless.com site, the affiliate gets a referral fee of as much as 15 percent.

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Bloomberg News and Erika Engle contributed to this report