Buying on Web to avoid sales taxes could end soon

By RACHEL METZ Jan 12, 2009

Shopping online can be a way to find bargains while steering clear of crowds - and sales taxes. But those tax breaks are starting to erode. With the recession pummeling states' budgets, their governments increasingly want to fill the gaps by collecting taxes on Internet sales, which are growing even as the economy shudders. And that is sparking conflict with companies that do business online only and have enjoyed being able to offer sales-tax free shopping. One of the most aggressive states, New York, is being sued by Amazon.com Inc. over a new requirement that online companies must collect taxes on shipments to New York residents, even if the companies are located elsewhere. New York's governor also wants to tax "Taxman" covers and other songs downloaded from Internet services like iTunes. The amount of money at stake nationwide is unclear; online sales were expected to make up about 8 percent of all retail sales in 2008 and total $204 billion, according to Forrester Research. This is up from $175 billion in 2007.

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