Play.com will become solely an eBay-style marketplace from March.
The business the company was founded on, stocking games and films etc. and selling them cheaply online, will cease to exist.
Play.com is the latest casualty of the government closing the Low Value Consignment Relief loophole, which waived VAT on imported goods from the Channel Islands (includes Jersey). This was closed in April 2012.
All 147 Play.com staff in Jersey are to be let go, as well as 67 others from Play's Cambridge and Bristol offices, reported the BBC.
The company will rejig operations to run out of Cambridge, where 200 staff will work.
"Moving forward we are intending to focus exclusively on our successful marketplace, which is our main business area, and to phase out the direct-retail part of our business," a Play.com statement read.
The abolishment of the LVCR loophole has apparently resulted in 600 people losing their jobs on the island of Jersey, where only around 100,000 people live.