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New US Laws Forces Trade Suppliers to Ditch Their US Affiliates

Amazon.com and other major online trade suppliers have warned to cut-off ties with Illinois businesses under a new law, which requires them to collect sales tax for the transactions carried out. Amazon.com announced that it has ended business associations with its Illinois-based affiliates that refer customers to the website and then collect a commission on any sales transaction that takes place.

Under a new law passed in Illinois, any online retailing company having affiliates in Illinois must collect sales tax from Illinois customers on all transactions. Amazon.com has announced that the trade relations will end on April 15, 2011. The contention of both the major trade suppliers is that since they do not have any offices, warehouses, or staff in Illinois, the order is entirely unconstitutional. In the US trade parlance, it was known as taxation without representation.

Illinois is the leading state in the US by the number of online trade affiliates operating out of the state. While there are about 200,000 of them nationwide, Illinois alone has about 9,000. US lawmakers believe that since Amazon and others make profits from their online trade dealings in Illinois, the sales taxes imposed are fair and just.

Online retailers in the US are facing a similar situation in many other states that are trying to collect taxes on sales, which has been ignored for years. Similar bills are in the pipeline waiting for approval in states like Arkansas and Vermont. States like New York, North Carolina, and Rhode Island have adopted similar laws.

Online retail companies managed by US wholesalers are bearing the brunt of US tax authorities, primarily because their budget are in complete disarray due to the extended recession. They are now looking at ways to collect every tax dollar. It is also being argued that online retailers should not get any price advantage over the local brick and mortar business by avoiding sales tax.

Trade suppliers like Amazon.com see the move as an attempt to squash Internet competition.