Overstock.com Investor

Press Release

Printer Friendly Version View printer-friendly version
<< Back
Overstock.com Drops Internet Affiliate Advertisers in California, Hawaii, North Carolina and Rhode Island.
--States' Tax Plans Backfire as e-tailer Ends Affiliate Relationships

SALT LAKE CITY, July 1, 2009 /PRNewswire-FirstCall via COMTEX/ -- Overstock.com, Inc. (Nasdaq: OSTK) today sent notices to all of its affiliate advertisers in California, Hawaii, North Carolina and Rhode Island that it is dropping their services owing to eminent passage of laws requiring internet retailers to collect taxes if they have local affiliate advertisers.

In May 2008, Overstock.com ended its relationship with over 3,400 of its New York advertising affiliates and sued the state when New York enacted the first of these anti-internet advertising laws. The suit is still pending along with a sister suit brought by Amazon.com.

"It's painful to have to terminate these relationships with affiliates, simply because they live in states where counterproductive (and likely unconstitutional) laws are being passed," said Patrick Byrne, Chairman and Chief Executive Officer of Overstock.com. "However, politicians have to remember that a tax is a price that government charges for a service, and when they raise their prices, we're going to buy less of their services."

Overstock.com's President, Jonathan Johnson, added: "Internet advertising is a tidy little business that can be done by just about anyone, anywhere on the globe. When states unwisely and unconstitutionally pass these laws, their local internet ad business will quickly go dark, and that business will simply migrate to states more friendly to internet commerce. In the end, the only thing to be accomplished by these laws will be to put more local citizens out of work--exactly the wrong choice in a down economy."

Overstock.com's action comes on the heels of Amazon's recent termination of its own North Carolina, Rhode Island, and Hawaii internet ad affiliates.

A handful of other states have considered similar laws which attempt an end-run around U.S. Supreme Court decisions requiring that a company have "physical presence" in a state before it can enforce sales tax collection obligations. The laws in question seek to designate local, independent internet advertisers as constituting sufficient physical presence in a state to justify the imposition of collection obligations.

Byrne observed: "Outside of Utah, we don't have the type of operations that storefront and other retailers have, and we don't impose the same burdens on local state infrastructure that locally based business do; therefore, imposing similar tax collection obligations on us in those states is patently unfair. When you come to realize that there are 7,000 taxing districts in this country, you get a glimpse of how big the burden would be. We, of course, do collect taxes, but only in states where we have physical operations - as the Constitution requires."

Overstock.com plans to sever its affiliate advertising relations in each state that appears to be close to passage of similar laws, and only reinstate these businesses in states were such laws are found unconstitutional, are vetoed or repealed. In addition to the states affected by today's action, the Connecticut legislature has considered, but not acted on a bill, and similar initiatives were considered and rejected by the Maryland, Minnesota, and Tennessee legislatures when those bodies foresaw the negative economic consequences.

When asked what will happen if states continue to put pass these laws, Byrne replied, "Sadly, the business of internet advertising will be one more US-invented business that will migrate overseas."

About Overstock.com

Overstock.com, Inc. is an online retailer offering brand-name merchandise at discount prices. The company offers its customers an opportunity to shop for bargains conveniently, while offering its suppliers an alternative inventory distribution channel. Overstock.com, headquartered in Salt Lake City, is a publicly traded company listed on the NASDAQ Global Market System and can be found online at http://www.overstock.com. Overstock.com regularly posts information about the company and other related matters on its website under the heading "Investor Relations."

Overstock.com(R) is a registered trademark of Overstock.com, Inc.

This press release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements include, but are not limited to, statements regarding continuation of termination of Internet affiliates. Our Form 10-K/A for the year ended December 31, 2008, our subsequent quarterly reports on Form 10-Q, or any amendments thereto, and our other subsequent filings with the Securities and Exchange Commission identify important factors that could cause our actual results to differ materially from those contained in our projections, estimates or forward-looking statements.

SOURCE Overstock.com, Inc.


http://www.overstock.com