Amazon shuts down Missouri associates program over sales tax dispute

A sales tax dispute between Amazon and Missouri has landed on online entrepreneurs in the state known as Amazon Associates.

You’ve probably read their blogs on all sorts of topics or considered their online product reviews of books and other products. If you followed one of their links to Amazon.com and bought something, anything, they collected a commission.

But those payments are going away. Amazon says it’s the result of a Missouri law that will take effect later this month. It subjects those online transactions to sales taxes, and Amazon is trying to sever the ties.

The retailer notified its Amazon Associates in emails Wednesday evening: “We will no longer pay any advertising fees for customers referred to an Amazon site after August 27.”

An Amazon spokesman acknowledged the email but declined to say how many associates it has in Missouri.

“This happened in a lot of other states,” said Jared Akers, an Amazon Associate from Lee’s Summit. “I thought Missouri was going to be safe from this whole thing.”

Instead, Akers stands to lose the little bit of money he makes on the side from 30 websites he operates and signed up as Amazon Associates. For example, his


site offers experiences and thoughts about watches and shoes for runners.

Most of the images there link to Amazon. The retailer rewards him and other associates with an “advertising fee” between 4 percent and 8.5 percent whenever a viewer clicks through to the giant online retailer and spends.

Under Missouri’s former law, those referred shoppers and other Amazon buyers shopped free of sales taxes. Amazon need not collect because it did not meet the state’s legal definition of “engaging in business” or “maintains a business” here.

Specifically, Amazon has no physical operations in Missouri, such as a warehouse or distribution center, though it does in Kansas. In legal language, the company has no nexus to Missouri.

But Missouri’s new law sets ways that an online retailer such as Amazon does have a nexus, or connection, in the state.

One creates that nexus if a retailer, in this case Amazon, relies on another company’s warehouse, distribution center or other facility in Missouri, or if a Missouri business otherwise significantly helps the retailer “establish and maintain a market in the state,” said a report on the new law from PricewaterhouseCoopers LLP.

The report said the law also establishes a “click-through nexus” when a Missouri resident refers customers to the retailer to the tune of at least $10,000 of sales in 12 months.

Akers said that threshold easily catches him up in the sales tax debate, though he’s not blaming Amazon for not wanting to collect.

“I’m upset at the states,” Akers said. “They think they’re going to get all this money. Maybe they are.”

Missouri, at least, is supposed to be collecting now.

Missouri charges a use tax on online transactions not subject to the sales tax. With the sales tax, the retailer is responsible for collecting from the consumer and remitting the money to the state. With the use tax, it’s up to the consumer to send the money in.

But fewer than 100 Missourians do that, said Rep. Jeremy LaFaver, a Kansas City Democrat. LaFaver co-sponsored a bill that turned into the nexus changes that became law.

Amazon’s email to its associates in the state called the new law unconstitutional. LaFaver said the legislature did not hear from the company when the bill was being debated.

Though Missouri and Amazon disagree about the state’s new law, both have their eyes on federal legislation. The U.S. Senate has passed the Marketplace Fairness Act, though the U.S. House has not yet acted.

That bill would resolve interstate commerce conflicts and give states federal authority to levy sales taxes on Internet transactions. But it requires states to simplify the taxation.

Kansas already has adopted such standards through the Streamlined Sales and Use Tax Agreement and collects millions of dollars in taxes on online transactions.

Missouri’s legislature included the streamline agreement in the sweeping tax bill that Gov. Jay Nixon recently vetoed. There may be a vote to override his veto.

Passing streamlining would make sales tax collections voluntary for online retailers, said Amy Blouin, executive director of the Missouri Budget Project. Collections in Missouri would become mandatory if the federal legislation passed, Blouin said, leading to hundreds of millions of dollars in tax revenues to the state and localities.

And at that point, Amazon’s associates in Missouri are welcome back, according to the email they got from Amazon.

The Star’s Jason Hancock contributed to this report.