E-tail Envy

Strapped states want Amazon and other sellers to collect sales tax

By Andréa Ford Monday, July 25, 2011

    • As states like Minnesota have labored to close painful budget shortfalls totaling $103 billion nationwide, the race to tap a hefty untapped revenue source--sales tax from online sellers--picks up speed. Booming Web sales will cost states as much as $11.3 billion in fiscal 2012--which would have been enough to halve or even close many states' budget gaps. But efforts to force online retailers to collect taxes have been curtailed by a 1992 Supreme Court ruling that sales tax must be charged only if a retailer has a physical presence, or "nexus," in the state where the purchase is used. States are now claiming that affiliate programs like those run by Amazon, which enable website owners all over the U.S. to earn commissions by plugging products sold on the Seattle-based site, establish nexus. The states will get their way if Congress passes the proposed Main Street Fairness Act, supported by brick-and-mortar retailers, which must collect sales tax. The stores want a level playing field. The states want money. But consumers would no doubt vote for tax-free e-shopping to continue.