While the National Conference of State Legislators struggles to find a workable formula for a uniform national sales tax on internet sales, several individual states are pressing ahead with their own legislation. Last year, Amazon started collecting taxes in New York after the state passed a law requiring the company to do so. Amazon contested the law in court but is faced with lengthy appeal processes and a doubtful final outcome. Heartened by New York's initial success, other states are following the New York example. Amazon has sent a letter to the Californian State legislature threatening to cease doing business with marketing affiliates based in the state rather than accept the responsibility for collecting and distributing the state sales tax.
Like California, North Carolina, Hawaii and Connecticut, are also considering legislation that would require on-line retailers with 'online marketing affiliates' in the State to collect sales tax. Amazon has thousands of such affiliates - vendors who obtain a sales commission from links on their own websites. North Carolina and Hawaii have received similar letters from Amazon. Amazon said efforts to force it to collect taxes based on marketing affiliate relationships were "unconstitutional" and would backfire if Amazon severed links with these advertising associates. It wanted to see a sales tax collection system that was as simple as the current physical presence-based system and evenly applied to all sellers. Seattle-based Amazon collects sales tax on sales in its own state and in North Dakota, Kentucky and Washington where it also has physical operations.
On July 1, Wisconsin will become the 23rd State to join the so-called Streamlined Sales Tax Project, which would provide for a uniform tax across the States and a streamlined collection process. However the project dates back as far as 2000 without showing signs of reaching a conclusion. The remaining States appear to be slow in signing up, even though a University of Tennessee Study estimated this year that the loss in revenue could reach more than USD11bn by 2012. A greater critical mass of participating states might help convince the Federal Legislature to introduce a uniform sales tax system.
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