States Most In Need of an eCommerce Sales Tax

Source: National Conference of State Legislatures || Photo: Jose Luis Pelaez | Photodisc | Getty Images 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 GustafsonPosted 14 May 2010

Photo: Altrendo travel | Getty Images Uncollected sales tax: 40% of gap Potential sales tax revenue: $628.6 million 2010 estimated budget gap: $1.57 billion General state sales tax: 5.5% Internet connected households: 2.7 million (58.6%)

Photo: Jeremy Woodhouse | Getty Images Uncollected sales tax: 42.1% of gap Potential sales tax revenue: $748.5 million 2010 estimated budget gap: $1.78 billion General state sales tax: 7% Internet connected households: 1.33 million (53.51%)

Photo: Cathlyn Melloan | Getty Images Uncollected sales tax: 45.4% of gap Potential sales tax revenue: $398.8 million 2010 estimated budget gap: $877.8 million General state sales tax: 7% Internet connected households: 1.49 million (58.1%)

Photo: Joe Sohm | Visions of America | Getty Images Uncollected sales tax: 48.5% of gap Potential sales tax revenue: $103.3 million 2010 estimated budget gap: $213 million General state sales tax: 6% Internet connected households: 369,000 (49.11%)

Photo: Jeremy Woodhouse | Getty Images Uncollected sales tax: 53.9% of gap Potential sales tax revenue: $1.77 billion 2010 estimated budget gap: $3.3 billion General state sales tax: 6.25% Internet connected households: 5.04 million (57.31%)

Photo: Glen Allison | Photodisc | Getty Images Uncollected sales tax: 69% of gap Potential sales tax revenue: $60.8 million 2010 estimated budget gap: $88.1 million General state sales tax: 6% Internet connected households: 197,000 (60.8%)

Photo: Walter Bibikow | The Image Bank | Getty Images Uncollected sales tax: 81.8% of gap Potential sales tax revenue: $347.7 million 2010 estimated budget gap: $425 million General state sales tax: 4% Internet connected households: 930,000 (49.81%)

Uncollected sales tax: 87.3% of gap Potential sales tax revenue: $303.2 million 2010 estimated budget gap: $347.1 million General state sales tax: 7% Internet connected households: 523,000 (45.97%)

Photo: Getty Images Uncollected sales tax: 110.8% of gap Potential sales tax revenue: $113.9 million 2010 estimated budget gap: $388 million General state sales tax: 4.225% Internet connected households: 1.34 million (56.13%)

Photo: Joe Sohm | Visions of America | Getty Images Uncollected sales tax: 113.9% of gap Potential sales tax revenue: $113.9 million 2010 estimated budget gap: $100 million General state sales tax: 6% Internet connected households: 585,000 (51.20%)

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