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Ecommerce sites under pressure to pay state taxes

Rachel Wheeler Archive
Ecommerce sites in the US could find that their status as tax-free outlets is under threat as states look to curb their widening budget gaps.

A growing number of states are looking for ways to generate additional revenue without breaking a 1992 US Supreme Court judgement that prohibits forcing businesses to collect sales taxes unless the business has a physical presence in that state.

States are trying to get around that restriction by passing laws that broaden the definition of a physical presence.

While it is not known exactly how much in taxes could be raised from online sales, a study by the University of Tennessee in 2009 estimated that it could total $10.14 billion, assuming total e-commerce sales of $3.49 trillion.

"The choice of the merchant by the customer should not be based on tax policy. It should be based on service, convenience, on the shopping experience and, of course, price - but not price based on tax policy," said David Vite, head of the Illinois Retail Merchants Association.

Posted by Paul Newman