Wednesday, July 01, 2009

Overstock follows Amazon, Drops Affiliates in Four States

Overstock follows Amazon, Drops Affiliates in Four States

patrickbyrneFirst Amazon paved the way for ecommerce sites like to exist and do business. Now it's paving they way for them to stick it revenue-hungry state governments. Overstock today followed Amazon and severed links with affiliates in four states.

Residents of California, North Carolina, Hawaii and Rhode Island will no longer be receiving referrer payments for products sold through their websites. The whole issue revolves around sales tax.

The states want Overstock to collect sales tax when an affiliate sells an Overstock item, as if the affiliate was actually a physical store selling its products. Overstock and Amazon beg to differ, since the affiliates are just that-- affiliates, not links in their supply and distribution chain.

Overstock appears to be pre-empting California's e-commerce sales tax legislation, since it hasn't been passed but is likely soon to be reconsidered by a state legislature desperate for revenue. As we noted yesterday, the upside for Amazon, and presumably Overstock, is that while the affiliate program was previously costing them marketing dollars, both companies can now keep revenue generated from affiliates, without actually having to pay omissions!

That's because despite the canceled commissions, the affiliates themselves are unlikely to immediately pull down their Overstock and Amazon links.

The move by both companies is viewed as throwing down a gauntlet to other state legislatures who get any funny ideas about passing new ecommerce sales taxes. All the battle seems to probably be just prelude. As one commenter said yesterday, "This is a constitutional matter and will ultimately be decided by the Supreme Court."

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