It may not be the stuff of tabloid headlines, but Amazon.com and Target could be headed for splitsville, according to new research report. For years, Amazon.com has run Target’s website, even as it’s lost other big enterprise customers like Toys "R" Us and the Borders book chain. Now an analyst is questioning the long-term prospects of the Amazon-Target relationship.

In a research report on Amazon today, Cowen & Co. analyst Jim Friedland writes:

Target.com, which accounts for an estimated 7% of 2010 non-GAAP operating profit, could end its partnership with Amazon. Amazon currently powers the website and provides fulfillment for Target.com. We believe Amazon’s contract with Target.com ends in August 2010. We believe it is possible that Target will eventually decide to take its website operations in house.

Amazon has provided the ecommerce backbone for Target.com since 2001. A few months ago, a Target spokeswoman told me the retailer’s current contract with Amazon runs through August 2011. If Amazon were to lose Target, its biggest known customer for the enterprise business would be U.K.-based Marks & Spencer.

I’ve heard that Amazon has a secret internal project code-named Vitamin C to create ecommerce platform tools for middle-market retailers. Perhaps Amazon is looking to middle-market, rather than the Targets of the world, to grow its enterprise business.

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and Amazon dumps Hawaii affiliates as sales tax battle escalates  

As states grappling with budget shortfalls try to force Amazon.com to collect sales tax, the online retail giant is systematically retaliating. The latest target is Hawaii. Amazon sent a note to its Hawaii-based affiliates informing them they will no longer earn commissions starting today. The company is cutting off affiliates in states that are trying to classify Amazon as a physical retailer — required to collect sales tax — based on its connection to locally based affiliates.

Amazon has also terminated affiliate programs in North Carolina and Rhode Island, and it’s sent out a series of warning letters to states, including California (given California’s size — and the large number of Amazon affiliates there — it will be interesting to see how that situation unfolds). Seattle online diamond retailer Blue Nile has also cut off affiliates in North Carolina and Rhode Island, citing the same tax legislation.

Amazon currently only collects sales tax in a handful of states, mostly where it has a physical presence in the form of offices or warehouses. The online retailer does not want to expand its sales tax collection — presumably believing it could turn off bargain-hunting shoppers in the recession — and has calculated that it’s more cost-effective to cut off the affiliates and shield itself from the requirement to collect tax.

Here’s the Amazon termination email to Hawaii affiliates:

We are writing from the Amazon Associates Program to notify you that your Associates account has been closed as of June 30, 2009. This is a direct result of the unconstitutional tax collection scheme passed by the Hawaii State Legislature with an effective date of July 1. As a result, we will no longer pay any referral fees for customers referred to Amazon.com or Endless.com after June 30.

We were forced to take this unfortunate action in anticipation of actual enactment because of the uncertainty and timing of a veto, and the possibility that a veto could be overridden. The governor has until July 15 to veto the bill but, as indicated, the bill has an effective date of July 1.

Please be assured that all qualifying referral fees earned prior to June 30, 2009 will be processed and paid in full in accordance with our regular referral fee schedule. Based on your account closure date of June 30, 2009, any final payments will be paid by September 1, 2009.

In the event that Hawaii’s governor vetoes this tax collection scheme, and that veto is not overridden, or in the event the law eventually is repealed, we would certainly be happy to re-open our Associates program to Hawaii residents.

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and Comcast rolls out WiMax service in Portland with Clearwire’s help  

Comcast is introducing its WiMax service in Portland this week — a new offering called High-Speed 2go that relies on the network of its Kirkland partner, Clearwire.

As part of the offering, Comcast will provide a data card for laptop computer users at a trial price of $49.99 per month for the first year. (Price will then increase to $73 per month). For $69.99 per month, customers also will be able to access the Internet over Sprint’s 3G network when they travel outside the WiMax territory.

By the end of the year, Comcast plans to offer the same service in Atlanta, Chicago, Philadelphia and others cities. The cable giant says it plans to offer broadband speeds up to 4 Megabits per second.

As InformationWeek notes, this offering gives the giant cable company the "quadruple play" of Internet, mobile broadband, television service and home voice calling.

Comcast invested $1 billion in Clearwire last year as part of a larger recapitalization of the broadband wireless company.

Here’s more from the press release.

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Blue Nile drops Rhode Island affiliates over state tax law  

Seattle’s biggest online retailers are upping the ante in their game of chicken with cash-hungry states. Today online diamond retailer Blue Nile joined Amazon.com in ending its affiliate program in Rhode Island (both companies have cut off affiliates in North Carolina as well). Affiliates link to retailers like Blue Nile and Amazon for a sales commission, and play a role in driving ecommerce business. But as cash-strapped states across the country look to classify online retailers as physical retailers through their work with local affiliates — and force them to pay sales tax — Blue Nile and Amazon are pulling the plug on the affiliates.

Here’s the text of Blue Nile’s termination email to Rhode Island affiliates, obtained by TechFlash:

We are writing to notify you that we are terminating our relationship with all Rhode Island affiliates, effective immediately. This is a result of the tax collection legislation passed by the Rhode Island state legislature, and expected to become law.
 
Blue Nile regrets the need to take this action. As the U.S. Supreme Court’s 1992 Quill decision makes clear, the proposed bill is unconstitutional as it requires sellers with no physical presence in the state to collect sales tax on sales to buyers in that state.
 
Blue Nile has taken this action in advance of the legislation’s implementation because the effective date is unclear. We have enjoyed working with you, and want to assure you that you will earn commissions on any qualified sales through the time of termination on June 30, 2009.
 
We remain hopeful that this unconstitutional legislation will eventually be repealed, at which point we would be happy to resume working together. Thank you for your participation in the Blue Nile Affiliate Program.

So how much will it hurt Amazon and Blue Nile to end these affiliate programs, particularly if the showdown expands to other states? Larry Dignan at Cnet explores that question, concluding:

Simply put, if Amazon cuts its Associates program in every state, its marketing expenses would fall dramatically and ultimately boost earnings. And Amazon would likely land the sale, anyway. Meanwhile, these small businesses that like Amazon’s commissions will be screaming at their state legislators.

Stay tuned — this battle appears to be far from over.

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