The online retailer Overstock.com is cancelling all of its advertising contracts in Connecticut because of a state law to collect sales tax for online purchases. In turn, it plans to give some Connecticut customers free accounts and cards worth $10.
The state recently passed a provision to collect sales tax for online sales, or the so-called “Amazon” law, the Hartford Business Journal reports.
In the economic report with the budget, Gov. Dannel Malloy cited a study that estimated the state lost about $50 million in 2010 from ecommerce, but the actual amount is not known.
"It is unconstitutional for a state to pass a law making out-of-state retailers collect sales tax simply for having business relations with marketing affiliates in those states," Overstock.com CEO Patrick Byrne said in a release. “So we have severed relationships with all of our affiliates in Connecticut, and have taken the money we would normally pay those affiliates, and are using it to reward our best customers in those states.”
The new law clarifies the obligation remote sellers have to collect and remit sales tax simply and that helps assure a level playing field with all businesses operating in the state, Kevin Sullivan, Commissioner of the state Department of Revenue Services, said in a statement on Tuesday,
“Overstock.com and others may walk away from their customers and partners in Connecticut, but they cannot walk away from their tax obligations here," Sullivan said. "Besides, there are plenty of sellers to choose from that are doing this same kind of business right here in Connecticut.”
“This should come as no surprise. What was so clearly foreseeable has now occurred," State Sen. Andrew Roraback, (R-Goshen), said in an e-mailed statement."Today, we learned that legislative Republicans who opposed this measure were correct when they voted not to impose this new tax. Sadly, the only consequence to this ill-considered measure will now be to inflict real harm on Connecticut-based businesses.”
Roraback is a ranking member of the Finance, Revenue and Bonding Committee.
How much money Overstock.com spent in Connecticut is not clear. NBC Connecticut left a message for the media relations department of the company. It was not immediately returned.
On Wednesday, State Rep. Chris Perone, a Democrat from Norwalk, said the state should reconsider imposing the online sales tax.
“I believe this tax puts jobs in jeopardy,” Perone said. “We have already had one very large online retailer and many smaller ones end their relationships with our state’s businesses and more will follow if we force them to collect sales tax.”
Overstock considers its best customers to be Connecticut residents who spent more than $300 in the past year. They will receive a free Club O membership -- normally priced at $20 -- and their membership account will come preloaded with an additional $10 balance.
The company is also adding $10 added to existing Club O Rewards accounts and extending memberships for one year.