Amazon, Overstock dump 'affiliates'

law requiring them to collect taxes, reports Bloomberg Business Week.

Amazon and Overstock both revealed that they are dumping Illinois-based 'affiliates' - people and businesses that refer customers to the Internet retailer and then collect a commission on any sales.

Under the new law, having affiliates in Illinois requires an Internet company to collect sales taxes on all transactions with Illinois customers. Amazon says it will end relations with Illinois affiliates on 15 April and Overstock says it will do the same on 1 May.

According to the Chicago Tribune, the law, which takes effect immediately, makes it tougher for these online merchants to claim they have no physical presence in a state - something they must do in order to avoid charging their customers sales tax.

Cnet reveals that Amazon said in a letter: “As a result of the new law, contracts with all Illinois affiliates of the Amazon Associates Programme will be terminated and those Illinois residents will no longer receive advertising fees for sales referred to Amazon, Endless or SmallParts.”

However, the letter ended by saying that "if this situation is rectified," Amazon would be interested in resuming its business relationship with its affiliates.