Online retailer Amazon.com today informed its Connecticut affiliates that it is terminating their relationship, effective immediately.  The contract terminations are the result of a new law that requires online retailers to collect tax from sales referred by Connecticut websites. 

“We opposed this new tax law because it is unconstitutional and counterproductive. It was supported by big-box retailers, most of which are based outside Connecticut, that seek to harm the affiliate advertising programs of their competitors. Similar legislation in other states has led to job and income losses, and little, if any, new tax revenue. We deeply regret that we must take this action,” the company wrote in an email this morning. 

Read the full email here.

Amazon’s affiliate program rewards websites for linking to products, paying out commissions of 4-6 percent depending on the volume of sales the site operator generates.  In May, Overstock.com announced it was terminating its relationship with affiliates, and a number of other sites followed suit.  Amazon has been largely silent on the issue until this morning.

Questions remain as to whether or not the tax will even be collected from the remaining online retailers.  In an April memo to legislators, Department of Revenue Services Commissioner Kevin Sullivan expressed doubts over the state’s ability to collect the tax. 

Retailers that have a presence in the state and/or collect Connecticut sales tax on purchases such as Apple and Walmart will not be impacted by the law. 

“We are not surprised, and that we are deeply disappointed that the legislators did not heed our warnings that this is the exact roadmap that Amazon, Overstock and others have used in other states where this law was passed,” Tom Caporaso, of Clarus Marketing Group in Middletown, said Friday. Caporaso runs a web site called freeshipping.com which is affiliated with many of these online retailers.

Lawmakers who opposed the tax said it doesn’t mean Connecticut consumers are going to change their shopping habits and suddenly decide to shop at brick and mortar stores. They’re going to continue shopping online and these Internet companies with a presence in Connecticut will move or go out of business.

“The Amazon tax levels the playing field for the small businesses on Main Street,” Sen. President Donald Williams, said Thursday. “We heard from the chambers of commerce, from small businesses all around the state, that said look just give us a break in terms of competiting with the Internet businesses in California and in the far flung corners of this country.”