NOTE FROM JOHN: What idiot came up with the notion that we should increase taxes on consumers during a recession that's teetering on becoming much worse? Yes, let's make demand even LESS. Congress ought to get involved and put a stop to this now.
What a headache this is going to be if sales taxes are going to be added. From my own experiences in Europe, where each country has its own VAT (which is always expensive), adding in sales taxes for online purchases is going to be a nightmare. For states that think it's going to bring them riches, the numbers are so far off, it's likely to cost everyone more money than it's worth. Big states with big teams of people and big budgets will perhaps figure it out but for small states and local taxes, I don't see them figuring this out easily.
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.
Based on that 2008 figure, Forrester analyst Sucharita Mulpuru says her rough estimate is that if Web retailers had to collect taxes on all sales to consumers, it could generate $3 billion in new revenue for governments.
It's uncertain how much more could come as well from unpaid sales taxes on Internet transactions between businesses. But even with both kinds of taxes available, state budgets would need more help. The Center on Budget and Policy Priorities estimates that the states' budget gaps in the current fiscal year will total $89 billion.
Collecting online sales taxes is not as simple as it might sound. A nationwide Internet business faces thousands of tax-collecting jurisdictions -- states, counties and cities -- and tangled rules about how various products are taxed.
