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Amazon.com calls tax law 'unconstitutional'

June 30, 2009 at 3:14 PM

SEATTLE, June 30 (UPI) -- Internet retail giant Amazon.com Inc. said it severed ties with third-party advertisers in Rhode Island to sidestep the state's new sales tax policy.

Amazon had already cut ties with advertisers in North Carolina, which has passed a similar law, the Los Angeles Times reported Tuesday.

Amazon allows thousands of Web site owners to earn fees by posting ads for Amazon. Although state sales taxes are generally applied to companies within the state, the new laws allow the states to tax products sold to their state's residents if the Internet retailer has third-party agreements with in-state businesses.

Amazon, for example, has its headquarters in Seattle, so it charges state tax for customers who live in the state of Washington.

Amazon spokeswoman Patty Smith said the new law "places an unconstitutional burden on interstate commerce for a state to require a seller without a physical presence in that state to collect sales tax."

The company is also lobbying to prevent California from adopting a similar law.

"If this new tax collection scheme were enacted, Amazon would have little choice but to end its advertising relationships with California-based participants in the Amazon Associates Program, " the company said in a letter to Gov. Arnold Schwarzenegger.

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