The following is cross-posted at

Last week, the Governors of Hawaii and California vetoed Amazon eTax bills that would unconstitutionally force out-of-state online retailers to become tax collectors.  In vetoing the bills, the governors argued they were net tax increases and violated the interstate commerce clause.  Additionally, the governors noted that online retailers would terminate contracts with in-state advertisers, as the legislation assumed these business affiliations provided a strong enough "nexus" in the state to force retailers to collect the tax.  By simply severing this connection, retailers would no longer be forced to collect the tax.

However, Rhode Island lawmakers and the Division of Taxation failed to get the hint.  After retailers sent letters to their advertisers and to legislators in Rhode Island stating they would be ending advertising agreements to avoid the unconstitutional law, lawmakers and Gov. Carcieri passed the tax hike as part of the budget anyway.  Then, as if completely unaware of what had just happened, the state’s tax collectors showed up late to the party and sent a notice to "a list of the top 100 internet retailers" explaining that they now need to collect the tax.  This comes despite the fact that under current law, the Division of Taxation is in charge of collecting tax directly from consumers on purchases made out of state.

Thanks for the courtesy note, Rhode Island Division of Taxation, but the retailers already decided not to do your job for you.

Did policymakers in Rhode Island and the Division of Taxation not get the hint that passing a law in clear violation of the U.S. Constitution and current Supreme Court jurisprudence would cause their own in-state advertisers to lose business?  Not only could they have looked to their counterparts in California and Hawaii, but lawmakers in Rhode Island were also informed through press and otherwise that termination of these contracts would occur if the law was passed.

Hawaii and California based advertisers have kept their business thanks to these vetoes, while Rhode Island policymakers simultaneously passed an unconstitutional law and caused in-state companies to lose business.  Let this contrast between states be a lesson for other lawmakers around the country.

Click here for ATR’s letter to Gov. Carcieri urging his veto of the budget, which included the eTax.