Continued from page 1

According to Madigan, there are 200,000 Internet retail affiliates across the country, some of which are fighting the legislation in their own ways.

FatWallet, which runs a coupon and deals website in Rockton, Ill., is planning to move to another state _ probably neighboring Wisconsin, founder Tim Storm said.

Storm believes the new law could cost his business $4 million to $5 million in revenue this year, which would be about a 30 percent to 40 percent hit, if it stays in Illinois. Already, the company has received notices from Amazon, Overstock, electronics site Newegg and musical instrument retailer Musician’s Friend on their plans to end affiliate programs in Illinois.

Storm believes Illinois’ law would backfire as affiliate companies such as his leave.

The strategy of cutting off affiliates might also backfire against Amazon and its competitors online.

Bricks-and-mortar retailers such as Walmart and Barnes & Noble Inc. have been recruiting affiliates being abandoned by Amazon and others. That means sales could go to these companies instead.

Walmart and Barnes & Noble are also among the businesses large and small that support a Washington, D.C.-based group called the Alliance for Main Street Fairness, which is in favor of the changing of tax laws in various states so that online retailers would have to collect sales taxes.

Amazon, Alliance spokesman Danny Diaz argues, is “working feverishly to exploit a loophole.”

Amazon does collect sales taxes in North Dakota, Kansas, Kentucky, and its home state of Washington. It collects in New York, too, as it fights the state over a 2008 law that was the first to consider local affiliates enough of an in-state presence to require sales tax collection.

Amazon is also tussling with Texas, which contends the company owes it $269 million in uncollected online sales taxes because it operates a distribution center near Dallas. Amazon plans to close that facility in April and scrapped plans to expand elsewhere in Texas over the dispute.

Paul Misener, Amazon’s vice president of public policy, said Amazon isn’t against the principle of collecting sales taxes. Rather, it wants “a constitutionally permissible system that is applied evenhandedly.”

Congress could give states authority to require tax collection by out-of-state retailers. Michael Mazerov, a senior fellow with the Center on Budget and Policy Priorities, believes such a federal law would be the best way to ensure that states get their taxes, but he understands why such efforts have stalled in Congress.

“It’s tough legislation politically because you’re asking Congress to pass legislation where they will be unfairly and inaccurately criticized as imposing a new tax,” Mazerov said.

For now, online sales tax bills will continue to pop up across the country, gaining support from some and inciting ire from others as more and more people shop online.

“It’s a little like ‘Groundhog Day,’” Madigan said.