Angry about Connecticut’s
new law applying sales tax to Internet purchases, Overstock.com has cut its
ties with affiliates in the state, the discount website announced May 23.

The company, a vocal opponent of efforts that force Internet
companies to collect sales tax, has also cut ties with affiliates in other
states which require online tax collection, including Rhode Island, New York,
North Carolina, Arkansas, and Illinois.

“It is unconstitutional for a state to pass a law
making out-of-state retailers collect sales tax simply for having business
relations with marketing affiliates in those states,” said Overstock.com
CEO Patrick Byrne. “So we have severed relationships with all of our
affiliates in Connecticut, and have taken the money we would normally pay those
affiliates, and are using it to reward our best customers in those states.”

Legislation that would require Internet companies collect
sales tax is currently being discussed in several states, including California
and Indiana.

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