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Tax-Free Amazon Days Numbered in California

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    NEWSLETTERS

    AP
    Amazon.com worker David Brendoff, left, moves boxes with merchandise for shipment Tuesday, Dec. 13, 2005, at the Amazon.com fulfillment center in Fernley, Nevada. With the holidays just around the corner, many shoppers are relying on online sites like Amazon.com to complete their shopping. This facility, over 800,000 sq. ft., or roughly 13 football fields, is capable of handling hundreds of thousands of orders per day. (AP Photo/Ben Margot)

    Amazon and other "e-tailers" may be reaching a tipping point on the question of Internet taxation.

    For years, online retailers have avoided adding sales taxes because of a 1992 U.S. Supreme Court decision holding that e-tailers are required to collect sales taxes only in states in which they have a physical presence.

    Increasingly, however, states have taken the position that online retailers like Amazon should pay sales taxes because of the various companies outside of Washington that drive business to Amazon.

    In fact, 24 states have requested Congress to pass a national law that makes internet taxing legal. But some aren't waiting.

    Eight states have now enacted such legislation, leading to a battery of law suits by Amazon and other similar companies.

    California legislators currently are considering their own legislation.

    The issue is important on several fronts. For California's state treasury, somewhere between $300 million and $1 billion are at stake annually, depending upon how the law is crafted. That's a good chunk of dough, given the state's $26 billion

    budget gap. For brick-and-mortar stores, online retailer legislation could level a playing field that has left them at a disadvantage since they are obligated to collect sales taxes.

    For consumers, an online tax could be sobering as well because they would be now paying sales taxes.

    Most states are at their wit's end dealing with unbalanced budgets. They're desperately searching for new revenue sources.

    Given these pressures, don't be surprised if we see Internet taxation sooner rather than later. The pressure is growing on too many fronts to expect otherwise.