Amazon retaliates against Vermont sales tax law

Amazon.com Inc. has barred Vermont residents and companies from earning money by referring customers to the Amazon website — a response, the company says, to a Vermont tax law.

Vermonters participating in the Amazon Associates program were notified by email Tuesday of their immediate termination. Vermont is one of six states whose residents are ineligible for the program, according to an Amazon Web page.

An email to Amazon associates in the state called the move “a direct result of Vermont’s state tax collection legislation.”

The legislation in question passed in 2011 and would apply sales tax laws to companies such as Amazon that solicit business through customer-referral agreements with Vermont residents.

State Tax Commissioner Mary Peterson said in a news release that the “click through advertising” law, which passed in 2011, was intended to increase pressure for a federal law.

The Vermont law has yet to take effect; it kicks in after the state Attorney General’s Office determines that one-third of states with sales tax have adopted similar laws.

Gov. Peter Shumlin says he plans to ask Vermont lawmakers to amend the measure so it takes effect one year after 25 states adopt similar laws, according to Peterson’s statement.

Peterson claimed Amazon canceled the advertising relationships to “maintain a competitive advantage over bricks and mortar sellers on our Main Streets.”

Cairn Cross, a Vermont venture capitalist, criticized Vermont for passing the law in the first place.

“They knew full well what they were doing. They received testimony, and the testimony said, ‘If you do this, this is how we’re going to react,’ ” Cross said. “And they said, ‘Yeah, whatever, we’ll do it anyway.’ ”

In an interview Wednesday, Cross predicted Amazon is the first of many companies, including big players including Google, that will discontinue online advertising programs in Vermont as a result of the law. And that, Cross added, would cause a cumulative impact on Vermont businesses.

“There are a lot of micro and small businesses that are making some sort of their income off these types of programs,” said Cross, co-founder and managing director of Fresh Tracks Capital.

Rachael Arnold, a South Burlington resident who runs a blog about quilting, said she used her Amazon Associate earnings for “pin money.”

Arnold was frustrated about the lack of lead time on Amazon’s decision — forcing her to make sudden changes to her site — and is concerned about the implications of Vermont’s tax law.

“I’m concerned that it may affect more substantial sources of income I get from blogging — namely, Google AdSense,” Arnold wrote in an email. “If other online-affiliate resources react as Amazon has in closing affiliate accounts, it will significantly change the landscape of internet marketing not only for bloggers, but for small businesses here in Vermont and across the US who use affiliate links to generate online sales.”

In its email to participants, Amazon indicated a preference for broad solutions to sales tax issues, rather than state laws.

“Amazon strongly supports federal legislation creating a simplified framework to uniformly resolve interstate sales tax issues,” the Amazon email stated. “We are working with states, retailers, and bipartisan supporters in Congress to get legislation passed that would allow us to reopen our Associates program in Vermont.”

The Seattle-based company did not respond to requests for comment.

Contact April Burbank at 802-660-1863 or aburbank@freepressmedia.com. Follow her on Twitter at www.twitter.com/AprilBurbank.