Hawaii Governor Linda Lingle has vetoed a bill that would have required online retailers such as Amazon.com and Overstock.com to collect and pay sales tax on their affiliate programs within the state.

Earlier this week both Amazon and Overstock had notified affiliates in the state that they would be ending their programs there due to the new tax requirements.

Linda Lingle

"I am vetoing this bill immediately to help ensure Hawai'i is not economically hurt by legislation that was not well thought-out and would have negative consequences for non-profits such as the University of Hawai'i bookstore, and businesses throughout our State," Governor Lingle said. 

"I am hopeful by vetoing this bill that mainland-based companies will promptly restore their relationships with our State."

Amazon said in an email it would be willing to re-open its associates program in Hawaii if the tax law was vetoed.

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governor vetoes this tax collection scheme, and that veto is not overridden, or in the event the law eventually is repealed, we would certainly be happy to re-open our associates program to Hawaii residents," Amazon said.

Arnold Schwarzenegger

California Governor Arnold Schwarzenegger also vetoed similar legislation that would have forced online retailers to collect and pay taxes on their affiliate programs within the state.

"I vetoed the majority vote tax increase passed by the legislature. With unemployment at an all time high, we should be doing everything we can to - keep jobs and create jobs - in California," Governor Schwarzenegger said.

"That is why my Administration immediately contacted Overstock.com when we learned of this news and, I am pleased to announce Overstock.com has reversed its decision and will continue to do business with affiliates here in California."

Amazon and Overstock have pulled the plug on affiliate programs in North Carolina and Rhode Island due to similar tax collection schemes. Both companies have signaled they would be open to restarting their programs in those states if the tax laws were repealed.