SHOCK: States’ Anti-Internet Taxes Backfire

Written by Lotus on Wednesday, 1 of July , 2009 at 9:40 pm

One of the leading “e-tailers” announced that they are canceling advertising contracts in Hawaii, North Carolina and Rhode Island because of those states imminent new tax plans.  Overstock.com‘s CEO and Chairman Peter Byrne said:

“It’s awful to have to terminate these relationships with affiliates, simply because they live in states where unconstitutional laws are being passed. However, 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.”

These new plans are an attempt to circumvent the Supreme Court’s decision that a company has a “physical presence” in order for states to enfore sales tax collection.  The new tax plans seek to designate local, independent internet advertisers as constituting sufficient physical presence in a state to justify the imposition of collection obligations.

In addition to Overstock.com, Amazon.com has also canceled advertising contracts in several states.  Both companies have pending sister suits in the state of New York regarding their anti-internet advertising laws.  Overstock.com has said that it will also sever its ties in any state that imposes similar laws. 

Internet retailer giants like Amazon and Overstock sever advertising contracts is just the beginning of the adverse affects these new tax plans will have on businesses and bloggers.  How many of our favorite blogs will cease to exist once the advertising dollars dry up? 

Los Angeles Times reports:

Overstock executives say they plan to sever ties with their affiliate advertising websites in any state that passes or “appears to be close” to passing similar laws.

“Internet advertising is a tidy little business that can be done by just about anyone, anywhere on the globe, and when states unwisely and unconstitutionally pass these laws, their local Internet ad business will quickly go dark, and that ad business will simply migrate to states more friendly to Internet commerce,” said Overstock.com President Jonathan Johnson.

“In the end, the only thing to be accomplished by these laws will be to put more local citizens out of work — exactly the wrong choice in a down economy,” he said.

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LOTUS lives in Northern Virginia. NOTE: The views expressed on LOTUS blog are the author’s alone. Organizations listed on this blog are for identification purposes only.