States are likely to push measures that require online merchants to collect sales tax on transactions conducted with customers located within their borders as more face budget shortfalls along with heavier demand for services in an environment of high unemployment.
According to a report by the nonpartisan Center on Budget and Policy Priorities, states are losing out on roughly $7 billion a year on sales taxes as consumers shift more purchases online. Some states, such as New York, have adopted legislation requiring retailers to charge sales tax if they have affiliates operating within their borders. So-called "Amazon" laws tax items sold online that are taxed when sold in stores within a given state.
Amazon.com has fought against the adoption of such legislation, arguing it places an administrative burden on e-tailers.
The Center on Budget and Policy Priorities dismisses Amazon's claim and asserts the company "calculates and collects sales taxes in every state except one for the Target department store chain, which has outlets in those states and therefore acknowledges an obligation to charge tax on its Internet sales made on Amazon's site. The fact that Amazon charges sales tax in connection with other companies' sales but not its own suggests that Amazon's primary goal is exploiting its price advantage and not avoiding sales tax compliance efforts and costs."
Discussion Question: Should online merchants be required to collect sales taxes even if they do not have a physical presence in states where they sell products? How would the imposition of sales taxes on all online purchases affect the growth of the e-tail sector?