Amazon fights sales tax drive

Amazon.com Inc. was affected with a growing movement to collect taxes on Internet transactions, and so could happen with other online retailers, but consumers have grown so comfortable with e-commerce that any impact on sales would likely be small. Over the past few weeks, Seattle-based Amazon has protested legislation in North Carolina and California that would require e-commerce companies to collect sales taxes if they have marketing affiliates - people who get a sales commission from links on their own Web sites - in those states. Hawaii and Connecticut are also weighing similar laws. Amazon says efforts to force it to collect taxes based on marketing affiliate relationships are "unconstitutional" and would backfire if Amazon were to sever ties with its advertising partners. The growing movement to tax Internet transactions comes as critics of the status quo argue Amazon and other Internet retailers enjoy a significant advantage over brick-and-mortar competitors, which collect sales taxes. It also comes as many states wrestle with large budget deficits amid the continuing recession and look for new sources of revenue. With $19.2 billion in revenue last year, the world's largest Internet retailer has become a tantalizing target. A recent University of Tennessee study estimated that uncollected taxes could cost state and local governments more than $11.4 billion in lost annual revenue by 2012. Amazon said that cutting relationships with marketing affiliates in states imposing Internet taxes would deny companies the advertising fees they currently receive and generate no new tax revenues from sales on Amazon. Bill Fox, co-author of the University of Tennessee study, said changes under consideration would merely bring Amazon and other Internet retailers in line with competitors like electronics chain Best Buy Co. (BBY) and book sellers like Borders Group Inc. (BGP) and Barnes & Noble Inc. (BKS), which are required to collect sales taxes by virtue of their physical presence in states across the country. In its turn, Amazon would support a federal effort to streamline state tax laws and give signatory states the authority to require all sellers to collect taxes, regardless of whether they are physically present in those states.