The economic slump is helping rekindle a debate on whether online retailers should have to collect state sales taxes, a question that has pitted the new economy against the old.
A half dozen cash-strapped states are contemplating new laws that would require e-commerce sites to charge shoppers local sales tax on purchases.
On Wednesday, Maryland legislators heard testimony from local merchants and Web site operators on a bill that could compel Web sites that employ local marketing affiliates to collect sales tax in the state. That followed a hearing Monday in Connecticut over a similar proposal.
A 1992 Supreme Court ruling prohibits states from forcing retailers without a physical presence in the state to collect sales tax on their behalf. Many states technically require local residents to pay so-called use tax on such purchases, but most taxpayers ignore those rules.
As Ari Armstrong has argued, Amazon’s Associates Program seemed to give Amazon a “physical presence” in Colorado. Amazon cleared the legal waters of the muck created by a poorly-written law by terminating its Colorado Associates.
For more information on this issue, please visit Repeal the Amazon Tax.