PROVIDENCE –– The Internet giant Amazon.com has severed formal ties with all Rhode Island businesses, a move intended to shield the online retailer from the General Assembly’s push to tax some online sales as soon as Wednesday.

An Amazon spokeswoman declined to say how many businesses –– local book dealers and other retailers — will be affected, but she confirmed that notification letters were distributed to “many local associates” early Monday morning.

“The government in Rhode Island is attempting to go about tax collection in what we feel is an unconstitutional manner,” said the spokeswoman, Patty Smith.

What has been dubbed the “Amazon tax” –– expected to become law as part of Rhode Island’s state budget on July 1 –– has been proposed by a handful of cash-strapped states. The plan would essentially force Rhode Islanders to pay a 7-percent sales tax for Internet purchases from out-of-state companies, such as Amazon.com, that have formal business relationships in the Ocean State.

While Amazon has no physical Rhode Island presence, several local businesses are enrolled in the “Amazon Associates Program,” which refers buyers to Amazon.com. The practice expands the online retailer’s exposure, while giving Rhode Island business owners up to 15 percent of the profit.

“We are writing from the Amazon Associates Program to notify you that your Associates account has been closed as of June 29, 2009,” reads the mass e-mail distributed by Amazon on Monday. “This is a direct result of the unconstitutional tax collection scheme passed by the Rhode Island General Assembly with a veto-proof majority. As a result, we will no longer pay any referral fees for customers referred to Amazon.com or Endless.com after June 29.”

By ending the affiliations, the company will not be required to collect Rhode Island sales tax when the new requirement becomes law, according to Smith.

Amazon’s sudden move will have no immediate effect on Rhode Island’s coffers. The state didn’t project any new tax revenue immediately, according to House Finance Committee chairman Steven M. Costantino.

“There’s nothing booked,” he said, adding that he continues to favor the “Amazon tax” because it creates a “level playing field for all Rhode Island businesses.”

Indeed, Rhode Island consumers currently pay 7 percent sales tax at local stores such as Borders, but generally do not for the same purchases at Amazon.com. (Current state law requires individuals to pay sales taxes for online purchases, but most individuals aren’t aware of the provision.)

In response to Monday’s news, the governor’s office said it was paying close attention to the situation in New York, where a lower court recently found the “Amazon tax” constitutional. Amazon and Overstock.com are appealing the ruling

“Since there are no savings booked in the budget, the administration will monitor the situation in New York and the decisions by the courts,” Governor Carcieri’s spokeswoman, Amy Kempe, said. “It should be noted that while Amazon is fighting this measure in New York, they have not stopped doing business with the affiliates in New York state.”

So far, Amazon has ended its business affiliations in only two states: North Carolina and Rhode Island. The company currently collects sales taxes from customers in states in which Amazon has a bona fide physical presence, including Washington, Kentucky and Kansas.

Smith said that if the law is repealed in Rhode Island, “We would be happy to reinstate the associates.”

Peter George is among those personally affected.

A marketing coach in Warwick and owner of Peter George Marketing Corp., he recommends a number of books on his Web site and receives what is essentially a commission, or referral fee, on each purchase.

“I understand the states want the revenue from it,” George said, adding that he also understands Amazon’s point of view.

He declined to say exactly how much money he receives each month from the Amazon affiliation. The amount is not significant, he said, but “I do this with a number of companies” and the total “does add up,” he said.

Amazon’s move should not have come as a surprise to state officials.

A coalition of online retailers such as Amazon, Expedia and Overstock.com submitted testimony opposing the proposal in late May. And Amazon issued a warning letter to the Senate Finance Committee Friday threatening immediate action.

“If this new tax collection scheme were enacted, Amazon would have little choice but to end its advertising relationships with Rhode Island-based participants in the Amazon Associates Program,’” reads the letter signed by Paul Misener, vice president for global public policy. “Thus, this provision would provide no new tax revenue collected by Amazon or others who sever their relationships with Rhode Island-based advertisers.”

The governor office has a mixed review of the Amazon tax:

“On one hand, this does level the playing field between bricks-and-mortar business and cyber business,” Kempe said. “On the other, it is, as a tax policy, piecemeal tax policy.”

ndowning@projo.com