Join the resistance

Amazon has filed suit against New York in response to a new law requiring online retailers to collect tax from buyers in the state.

Rival Overstock took a less complex measure: it has canceled relationships with its 3,400 New York-based affiliates, reports The New York Times.

"We can’t afford to have our New York affiliates up online if it subjects us to New York sales taxes," said Jonathan Johnson, SVP of corporate affairs for Overstock.

The company seeks to "[show] the New York governor and legislature that this is bad for New York businesses."

In addition to severing affiliate relationships, Overstock also ended relationships with comparison shopping firms, like Jellyfish, and Entertainment Publishing, which prints coupon books.

Overstock's decision may inspire copycats and is a potentially serious blow to New York's legislature, which passed the law under the rationale that online affiliations with New York-based retailers is equivalent to having a taxable in-state retail presence.

The new law, dubbed the "Amazon Tax," was expected to rake in an extra $50 million per year for New York State. The first-of-its-kind ruling may inspire other states to follow suit, which would riddle the online retail market with lawsuit land mines, and raise costs for consumers.

Days after the law was passed, California began mulling a state tax on digital downloads.

For its part, Amazon has no plans to cut off New York-based affiliates. Spokeswoman Patty Smith of Amazon stated that Amazon will "begin collecting sales tax no later than June 1, 2008."