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Demand for more revenue may come from Internet sales

Tuesday - 11/27/2012, 9:33am  ET

How states plan to capture revenue from growing online market

Michelle Quinn, Silicon Valley Correspondent for Politico

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Dick Uliano, wtop.com

WASHINGTON - Online shopping has provided a long-time advantage to consumers, tax- free shopping.

But during these tough economic times states are hankering for cash and the demand for more revenue could make tax-free shopping on the Internet extinct.

Starting next September, Amazon will begin collecting the 5 percent sales taxes in Virginia, adding the Old Dominion to a growing list of states beginning to cash-in on Internet sales.

Virginia's law requires sales tax collection when the seller has facilities located inside the state.

Amazon opened distribution facilities in Chesterfield and Dinwiddie counties this fall.

Amazon's tax collection would start Sept. 1, 2013, unless federal law changes the date to Jan. 1, 2014, according to a news release from Gov. Bob McDonnell's office.

Currently under Maryland law, residents are supposed to pay sales tax to the state when it's not collected by Internet sellers or when residents buy merchandise in sales-tax-free states, such as neighboring Delaware. But State Comptroller Peter Franchot says the state's inability to ensure compliance makes the law virtually unenforceable. Franchot estimates more than 95 percent of Marylanders don't pay the so-called "use" tax.

Owners of brick-and-mortar stores have long complained that tax-free sales on the Internet have created an uneven playing field, hurting retail stores.

Since Internet sales started, consumers have enjoyed tax-free shopping. It may have helped the Internet grow, but Internet sales are booming and states seem eager for a piece of the pie.

The National Conference of State Legislatures estimates that if states collected sales tax from online and catalog purchases, they would have $23 billion more in their treasuries this year.

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(Copyright 2012 by WTOP. All Rights Reserved.)