Amazon.com told many of its Colorado online business affiliates Monday that it would sever its business relationship with them, a move that could slice into the revenues of thousands of Web retailers.

The company blamed state lawmakers for enacting a law requiring it to notify those who purchase Amazon merchandise through a local website that they owe state sales taxes.

Lawmakers in turn criticized Amazon’s move as a hostage-taking gambit to force reversal of the measure.

The affiliates, ranging from online booksellers to individual bloggers who advertise Amazon on their websites to receive a commission in return, were both angry and confused by the move. And some say they were not notified.

“We had to find out from others, and we will lose 10 percent of our (revenues),” said Judith Briles, chief executive officer of Mile High Press, a book publisher in Aurora. “Amazon is going to get horrendous publicity for this. But there are two bad guys: Amazon and the lawmakers who moved this legislation through so fast.”

Jeannine Crooks of Parker runs a number of online sites that refer customers to bigger retailers. She only recently became affiliated with Amazon, but said she will have to find other online stores that carry the products she offers. That may not be easy if other online merchants follow Amazon’s lead.

“It’s putting our entire industry at risk,” she said.

Impact of the new law

At issue is a recent law enacted by legislators mandating Amazon and other retailers notify their online shoppers they must pay a 2.9 percent sales tax on purchases. Designed to offset a massive budget shortfall, it is expected to generate $5 million.

Amazon.com, Overstock.com and other online retailers that sell across state borders do not regularly collect sales taxes, though businesses with physical stores in Colorado must. They have fought attempts in other states to enforce collections of taxes on their products.

After Amazon criticized earlier versions of the Colorado bill, it was modified by law makers to ensure that affiliates did not bear any regulation burden.

On Monday, Amazon sent e-mail messages to some affiliates saying lawmakers “clearly intended to increase the compliance burden to a point where online retailers will be induced to voluntarily collect Colorado sales tax — a course we won’t take.”

The company, which did not respond to an interview request from The Denver Post, also urged affiliates to call the legislature to urge reversal of the new law.

“It’s flat-out blackmail”

State Sen. Greg Brophy, R-Wray, said he was swamped with e-mails from affiliates Monday and plans to try to reverse the tax measure.

At least 3,000 affiliates could be hurt, he said, though the economic impact of Amazon’s move could take weeks to determine.

“I think a full-blown repeal or something else can be done,” Brophy said. “We still have 65 days left in session — we can move an emergency bill through.”

But that will require the blessing of Democratic leaders who unleashed a slew of their own press releases saying Amazon is using dirty tactics.

“It’s blackmail, it’s flat-out blackmail,” said Jack Pommer, D-Boulder, author of the original bill. “It shows the lengths to which they’ll go to keep the advantage they have over other local businesses.”

Public finance experts say Amazon’s argument that the new law is burdensome makes little sense.

“Take Target — it has brick- and-mortar stores but also a website,” said Alec Harris, policy analyst for the Colorado Fiscal Policy Institute. “If I go to Target.com, it calculates what I owe. It’s not hard.”

Gov. Bill Ritter issued a statement saying Amazon is “simply trying to avoid compliance with Colorado law.”