Amazon Crosses Off 2 More States

You can add two more stars to Amazon.com's (Nasdaq: AMZN  ) list of booted affiliates. The leading online retailer is saying goodbye to Amazon Associates members in Rhode Island and Hawaii, after telling its online affiliates in North Carolina to take a hike.

Amazon isn't being ruthless. All three of those states have bills on the table that would force online retailers to collect state sales or excise taxes on resident affiliates.

Forget the notion of a "worldwide" Web. If you're a Hawaiian college student who blogs about classic cars, and you made the shrewd move of joining the free Amazon Associates programs so you can net commissions as high as 15% for sending traffic to Amazon's virtual auto-supplies store, it doesn't matter if most of your blog readers live far off the island.

In Amazon's eyes, you're poi, son.

This decision isn't personal. From Amazon's point of view, forcing everyone in Hawaii to pay the state's excise tax of up to 4% simply isn't worth the cost of keeping the affiliate program afloat.

Amazon isn't the only one cutting ties, either. Blue Nile (Nasdaq: NILE  ) gave its affiliates in North Carolina and Rhode Island the boot. Overstock.com (Nasdaq: OSTK  ) even dared to go where Amazon hasn't, by axing its New York affiliates after the Empire State passed similar sales-tax legislation last summer.

Publishers of all sizes have other options. Instead of targeting specific products in Amazon's growing online catalog, they can turn to broader contextual marketing programs, such as Google's (Nasdaq: GOOG  ) AdSense and Yahoo!'s (Nasdaq: YHOO  ) YPN, which automatically populate a site with relevant text ads. However, those programs lack the ability to point interested readers to a specific product. ValueClick's (Nasdaq: VCLK  ) Commission Junction and Google's DoubleClick do, but it's just a matter of time before participating merchants bow out, too.

Ultimately, the states will feel the pinch, because they'll lose the tax receipts they figured they'd collect under their proposed laws. At a time of stubborn unemployment rates, legislators will also have to explain to their constituencies why they're passing laws that lower the earnings power of their Web-savvy residents or boost delivered prices on online goods.

Amazon never wanted to stitch this flag, but there's room for 47 more stars if necessary.

Other headlines to rock out to:

Google and Blue Nile are Motley Fool Rule Breakers selections. Amazon.com is a Motley Fool Stock Advisor pick. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz has been shopping online for about as long as Amazon.com has been in business. He owns no shares in any of the stocks in this article and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


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  • Report this Comment On July 01, 2009, at 1:23 PM, retry77 wrote:

    Right on Amazon! Forcing online global companies to become TAX COLLECTORS for individual states is ridiculous.

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