The Surge to Impose Online Sales Taxes

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Under the bill, which is still being drafted, the states would compensate e-tailers for the cost of collecting taxes, and would agree not to prosecute them for tax errors, removing much of the liability, says Neal Osten, federal affairs counsel at the National Conference of State Legislatures, which is helping to draft the bill. Stifel analysts are skeptical that the bill will pass, though they believe it will make more headway in the current Democratic-controlled Congress. "The effort appears to have a somewhat better chance than in prior Congresses," Blair Levin, managing director at Stifel, wrote in a recent report.

Laws that vary by state would no doubt be a headache for companies that sell products online across the country. In the coming days, Minnesota's House of Representatives is due to consider a bill introduced by Representative Jim Davnie that would levy a sales tax on digital downloads of e-books, music, movies, and even ringtones. The tax would affect a wide range of tech companies, including Microsoft (MSFT) and Apple (AAPL). "There's clear opposition from the IT industry," Davnie says. "Apple, Microsoft have been in my office." Microsoft declined to comment for this story. Apple couldn't immediately be contacted.

Amazon.com Wants Tax Uniformity

Some Internet players oppose pro-tax efforts by local governments too. Priceline.com (PCNL) has about 50 lawsuits pending that involve various cities and counties trying to impose local hotel occupancy taxes on the site's customers, says Darrel Hieber, partner at law firm Skadden, Arps, Slate, Meagher & Flom, which has represented Priceline in such cases since 2004.

While Amazon.com opposes the New York State law, it supports efforts to impose taxes in a uniform manner. "We'd be O.K. with a mandatory collection requirement as long as the states' tax systems were truly simplified and the collection evenhandedly applied," Amazon.com spokeswoman Patricia Smith writes in an e-mail. Many small businesses are also making peace with the notion. "We think it's fair for people to collect sales taxes on the same terms [as brick-and-mortar small businesses]," says Todd McCracken, president of the National Small Business Assn. "There's a need for a comprehensive, national approach to this. There's got to be some final resolution to this because these issues have been festering for years."

Kharif is a senior writer for BusinessWeek.com in Portland, Ore.

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