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Amazon, Overstock cut ties with Illinois affiliates

The front door of Amazon.com headquarters in Seattle.
(via Flickr/Robert Scoble)
The front door of Amazon.com headquarters in Seattle.

Updated 2:12 p.m. March 11, 2011 to include Overstock.com information.

Amazon.com has made good on its threat to cut ties with Illinois affiliates because of a new law requiring the online store to collect sales taxes.

Amazon notified its Illinois partners Friday that it will stop doing business with them on April 15. It calls the tax law "unconstitutional and counterproductive.

Gov. Pat Quinn signed legislation Thursday that requires online companies to collect sales taxes on Internet purchases if they have any affiliates based in Illinois. Affiliates are businesses that refer customers to Amazon and get paid commissions on purchases.

The sales tax always applied to Internet sales, but individuals - not online businesses - were responsible for paying it. Few people did.

Additionally, the president of Utah-based Overstock.com says the online retailer will cut ties with its Illinois-based partners beginning May 1.

Overstock President Jonathan Johnson tells The Associated Press he thinks the law is unconstitutional because his company does not have a physical presence in Illinois.

Johnson says many Illinois affiliates tell him they plan to move to Indiana to maintain relationships with Overstock.com.