Overstock Dumps Affiliates, Rants About Tax-Happy States

Overstock (OSTK) is joining Amazon (AMZN) and Blue Nile (NILE) in the parade of e-commerce companies dumping affiliates in states that aim to slap a tax on Internet referrals.

On Wednesday, Overstock said that it will drop its affiliate advertisers in California, Hawaii, North Carolina and Rhode Island—four states looking to tax referrals.

In a statement, Overstock called these state tax laws “anti-internet advertising laws.” Overstock and Amazon have lawsuits pending against the state of New York. The states want tax revenue and e-commerce companies argue that taxing referrals is unconstitutional. The question: Are people that collect commissions for pointing to an e-commerce site the same as physical assets?

Also see: Amazon vs. tax happy states: E-tailer could nuke Associates program and still win

Overstock said that it will sever affiliate ad relations in any state that appears to be close to pass tax-happy laws. You can expect other e-commerce companies beyond Overstock, Amazon and Blue Nile to do the same. Overstock president Jonathan Johnson said:

Internet advertising is a tidy little business that can be done by just about anyone, anywhere on the globe. When states unwisely and unconstitutionally pass these laws, their local internet ad business will quickly go dark, and that business will simply migrate to states more friendly to internet commerce.

While Amazon is the big e-commerce dog on the block, Overstock is likely to become the most vocal about the referral tax issue. If Amazon is a Saint Bernard (or any other big dog you can think of) Overstock is the yapping terrier that won’t shut up. After all, the company is quite chatty and will beat the issue to death—something that needs to happen. Overstock’s war of words with short sellers in recent years has been entertaining to say the least.