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Amazon to Connecticut, Arkansas: 'Drop Dead' Over Sales Tax

Amazon.com’s war with the states over sales tax is heating up, and the company’s affiliate programs in Connecticut and Arkansas are the latest casualties.

The internet retail giant has managed to avoid collecting state sales taxes across the country thanks to a 1992 Supreme Court decision that ruled that states cannot require companies to collect such taxes if they don’t have a physical presence in the state . But with states across the country facing major budget shortfalls, officials are moving aggressively to try and force Amazon to collect the taxes by arguing that the company has in-state presences through distribution centers or local “affiliate” partners.

The latest skirmishes have erupted in Connecticut and Arkansas, which are both moving forward with bills aimed at forcing Amazon to collect the tax.

Last month, Connecticut Gov. Dannel P. Malloy, a Democrat, signed a budget bill that includes a so-called “Amazon tax,” which aims to raise $9.4 million by forcing online retailers to collect sales taxes through affiliates.

In response, Amazon said Connecticut’s budget runs afoul of the Supreme Court’s decision ( Quill Corporation v. North Dakota ) and said it would immediately cut off its affiliate relationships in the state. The company accused big-box retailers such as Wal-Mart, which argue that Quill gives Amazon an unfair advantage, of being behind the legislation.