Overstock.com will sever its relationship with Massachusetts-based affiliates if legislation is passed requiring it to collect the state's sales tax. The company sent a letter to the affiliates informing them that "the Massachusetts state legislature has introduced bills which put our continued relationship in jeopardy."

Overstock.com has already severed ties with affiliates in all ten states that passed such legislation - reluctantly, according to the company's General Counsel Mark Griffin, who told EcommerceBytes that "states have a sales tax collection problem and are trying to get someone else to collect the tax for them."

According to the letter, Massachusetts legislators are considering three bills - HB 2762, SB 1330 and SB 1462 - which, according to the company, "contain click-through affiliate nexus language modeled on a bill first passed in New York. These bills attempt to impose the responsibility of collecting sales tax on out-of-state retailers if those out-of-state retailers use Massachusetts based affiliate advertisers."

Griffin said it's difficult for companies to deal with the patchwork quilt of laws and said Overstock believes these laws are unconstitutional. "Each one has a twist unique to the state and it's hard to figure out what it means. The states say by using the services of advertisers in their states, companies have made a connection to that state, but we believe that's not the law."

The company is in favor of federal legislation, but it can't support the current Marketplace Fairness Act as it currently exists. "We are working with the sponsors," Griffin said. "There are fairness issues that run both ways." They are making progress, however, and are "down to short strokes," he said.

Five years ago New York passed affiliate nexus legislation. At the time, Amazon and Overstock both opposed the legislation and sued the state. In the intervening years, Amazon began pushing for federal legislation and began making individual deals with states, agreeing to collect sales tax by a future date if federal legislation had not been passed by that time. This allows Amazon to continue building warehouses and facilities in those states, including Massachusetts.

As for online sellers, a survey of readers in December found 85% of respondents opposed a national sales-tax law, and 83% believed sales-tax legislation would have a negative impact on their business.

Overstock general counsel believes pure-play retailers are at a disadvantage - they must pay credit card exchange fees for the total amount of all transactions - "why should we pay extra fees on the sales tax collected," Griffin asked. There are 9600 jurisdictions across the country. "If you want to conscript us to collect the tax, consider paying for the service."

States should provide software - and, "they should provide us with immunity from lawsuits" that might be filed due to software errors from over- or under-collecting, Griffin said.

Overstock.com advised its Massachusetts affiliates to make their voice heard on the matter. "We urge you to contact your local legislator immediately and urge him or her to oppose these bills," according to its letter.