The U.S. Supreme Court has ruled that retailers are not required to collect state sales tax from customers, unless they have a physical presence in that state.  As a result, consumers usually don't end up paying sales tax on purchases made on the internet.  Recently, New York tried to get around the Supreme Court ruling by passing a law which would consider retailers with advertising partners or referrers, to have a physical presence in the state.  There is currently a suit pending in the New York courts.

     As part of the budget, Rhode Island's General Assembly passed a similar law, without regard to its constitutionality.  Amazon.com warned that they would sever ties with local businesses if the law passed, and they did.  Now, it appears that other online companies are following suit.  Both Overstock.com and Bluenile.com have announced that they are canceling relationships with advertising affiliates in the state, since it would require them to collect taxes form customers.  Shoppers are still able to buy from these companies, but local businesses will lose referral income, and the state still won't get any sales tax from the purchases.

     This leaves us wondering who will be next?  As word spreads around the internet of Rhode Island's stupidity, how many other companies will terminate advertising agreements with local businesses and individuals?  Also, how much will the state lose in income tax, now that these businesses and individuals won't be allowed to benefit from affiliate programs?  The only thing that is certain is that the amount will be greater than the amount of sales tax received, since that amount will be zero.