Overstock.com yesterday reinstated its relationship with Hawai'i-based affiliate advertisers following Gov. Linda Lingle's decision to veto legislation that would have forced the online retailer to collect taxes on its Hawai'i sales.

Lingle's veto Wednesday followed Gov. Arnold Schwarzenegger's veto of similar legislation in California.

"Today we cheerfully comply with Governor Lingle's request that we promptly restore our relationships with her state," said Patrick Byrne, chairman and chief executive officer of Overstock.com. "We are more than happy to do so and thank the governor for seeing clearly on this bill,"

Earlier this week, Overstock.com, Amazon.com and online jeweler Blue Nile canceled advertising contracts with affiliate Web sites in Hawai'i and other states where legislatures had passed bills allowing Internet sales to be taxed.

An advertising affiliate is an independent Web site that displays an ad for an Internet retailer. If the customer clicks on the ad and ends up buying a product, the affiliate gets a commission.

Amazon spokesman Patty Smith said the online retailer was "grateful" for Lingle's veto.

"We will reinstate Hawaii-based associates as soon as we receive confirmation that the legislature will not override her veto," Smith said in an e-mail.

A Blue Nile spokesman said the company also supports Lingle's veto.

"It is the right move for Hawaii's many entrepreneurial and hard-working citizens who depend on affiliate commissions for all or part of their income. Blue Nile is pleased to announce that we are taking the necessary steps to resume our relationship with Hawaii affiliates," spokesman John Baird said in an e-mail.

Lingle said she vetoed the bill because it would hurt the state economically and have negative consequences for nonprofits such as the University of Hawai'i bookstore.

Lingle also said the state attorney general found that the bill may be legally defective because its scope was broader than the subject of its title.

State House Majority Leader Blake Oshiro, D-33rd ('Aiea, Halawa Valley, 'Aiea Heights), on Wednesday said House lawmakers will not try to override the veto because of the technical flaw. Overrides require a two-thirds majority of votes in both the House and Senate to succeed.