New York City -- Amazon.com said Friday that it would drop its online affiliates in Arkansas in response to a new state law that would have required the online retailer to start charging sales tax, the Associated Press reported.
Lawmakers passed a bill earlier this year to require out-of-state online retailers such as Amazon to collect sales tax from customers if their annual sales in the state exceed $10,000.
The bill applied to retailers with online affiliates, even if they don't have a physical presence in the state. Amazon pays advertising fees to a network of so-called Amazon Associates in the state, who promote the company on their websites.
State law requires consumers to pay sales taxes on items they buy online, but the burden is on them to report the purchases. Bentonville-based Wal-Mart Stores and other state retailers say that opens a loophole that hurts their businesses.
Amazon opposed changing the law, and this week, it notified associates by email that it would terminate their contracts on July 24.
Amazon has made the same move in other states, including Illinois and Connecticut, which changed their sales tax laws.