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An eCommerce Sales Tax Solution?

In the wake of the recession, unprecedented budget gaps are pushing state governments to make difficult reductions in spending - from education cuts and worker furloughs to state-wide "garage sales" - to make up for revenue shortfalls.

One point of contention is how cross-border sales taxes are collected. In some states, if a retailer sells merchandise via their website or catalog, but has no physical presence in the state, no sales tax is collected. Recently, the National Conference of State Legislatures (NCSL) conducted a state-by-state analysis that takes a look at which state budgets would be most affected if these taxes were implemented. According to the NCSL, some states could cover significant portions of their budget gaps - even swing into surplus - if they put this tax in place.

However, it is a contentious issue. "The Main Street Fairness Act," which is expected to be proposed in Congress this summer, would require the payment of state sales tax regardless of whether a retailer has a physical presence in that state. The bill faces challenges - including a 1992 Supreme Court ruling and Constitutional concerns regarding the Interstate Commerce Clause - but also carries the possibility of closing a major tax loophole for cash-strapped states. The basic idea is to "level the playing field" for competition between bricks-and-mortar stores, who must collect sales taxes on every purchase, and online retailers like Amazon.com and eBay, who don't necessarily have to. There also exists the potential for cross-state economic conflicts and concerns about whether this type of taxation would go too far.

But in this environment, which states stand to collect the most from a cross-border sales tax, relative to their budget gaps? Click ahead to find out!

By Paul Toscano & Krystina Gustafson
Posted 14 May 2010

Source: National Conference of State Legislatures || Photo: Jose Luis Pelaez | Photodisc | Getty Images