Battle Between States and Etailers Over Sales Tax Collection Heating Up

Most Americans probably aren’t aware, or choose to ignore, the sales tax owed to a state where they had their online purchases shipped, but the states have noticed, and are taking action. The money being left on the table is huge, with one estimate putting the number at $23 billion in uncollected taxes owed to the states by 2012.

Since the start of the year, a number of states from California to Tennessee have introduced legislation to force out-of-state Internet retailers to collect sales tax from online shoppers. Illinois is the latest, with Gov. Pat Quinn signing HB 3569 into law, a move that prompted e-commerce giant to terminate its relationship with 9,000 affiliates rather than collect the sales tax. California, meanwhile, held a revenue and taxation assembly committee hearing recently to address AB 153, authored by Rep. Nancy Skinner (D-Oakland). The committee is expected to take a vote on the measure in the coming weeks. Supporters of the bill claim out-of-state retailers get an automatic price advantage, since they don’t collect sales tax. Opponents, meanwhile, declared their livelihoods will be threatened if the bill passes, predicting the out-of-state advertisers they rely on for income will terminate their relationships, rather than collect the sales tax.

“If everybody paid the sales tax that’s due, the states’ budgets wouldn’t be as bad as they are,” says Diane Yetter, president of Yetter Consulting Services and the founder of the Sales Tax Institute.

For a complete look at the story, including a list of states with similar bills pending, click HERE.