The other day I purchased a calculator and ten reams of printer paper from a large retail supplier on the Internet. I got a good deal on everything, and when I checked out discovered I was not charged California sales tax.

Sales tax may be insignificant to an occasional online customer, but it's huge if you're an on-the-ground retailer competing with Internet-only stores. In Chicago, where sales tax is 10%, customers buying online start off with a ten per cent every day discount. You can see why this might bother local stores. All but five states have laws making you personally responsible for sales tax whether or not it's collected when you make a purchase.

Independent bookseller organizations and other worthy groups are fighting to force online entrepreneurs to apply state sales tax to online purchases. New York this week passed a law "that will force out-of-state etailers to collect sales tax on purchases made by New York residents."

The argument against this used to be it's just too cumbersome to figure out where a customer lives and collect the local tax. These days that is just plain silly -- they have these big computers, see, and they can easily use your zip code to calculate sales tax.

Every legal store in California collects tax using nothing more high-tech than a hand-held calculator or a cash register. Amazon could comply with state law in a New York minute, but they would give up their tax advantage over local stores.

California booksellers rightly claim it's immensely unfair to cede a significant cost advantage to Amazon and others skirting the spirit of tax laws. One California Assemblyman recently pushed for sales tax to be applied to online music purchases. His proposal failed, but more are in the pipeline.

There are different ways to view all this. One merchant wrote to Publishers Weekly: "I am a small time book seller on Ebay, Half.com and Amazon. I collect sales tax for my own state, (PA) and it is more trouble than it is worth. If I have to collect sales tax for another state then file quarterly or whatever returns for a couple of dollars I will just quit selling to people in those states. Also, I will quit buying from New York state sellers unless I am getting a really good deal."

Indeed, for someone selling online from his kitchen table it is difficult to figure local taxes for places all over the nation. It takes a higher level of bookkeeping than small sellers are used to.

Believe me, this is a vexing issue for everyone.

You may have tussled with California state income taxes this month. Take a look at line 49 on Form 540. You are asked to calculate and remit a "use tax" on those cigarettes you bought in Nevada, the books you found on Amazon, or that car you bought in Oregon. You do save your receipts and report all those purchases don't you? Hello?

This is a big story, with fiery arguments for and against. In 1992 the Supreme Court weighed in, and it's not over yet. Bill Petrocelli of Book Passage in Corte Madera claims California is missing out on at least $48 million a year in tax revenues due to tax free online.

Aired Sunday April 13, 2008 at 10:55 am and Wednesday April 16, 2008 at 1:00 pm

Orders/Information:

New York passes sales tax legislation (Publishers Weekly) http://www.publishersweekly.com/article/CA6549904.html?desc=topstory

Bill Petrocelli: "Fewer Books, More Potholes: The True Cost of Amazon's Tax Gimmickry" http://www.nciba.com/news/index.html#amazon

I'm not a fan of MSNBC, but this article is an excellent, detailed summary of the situation: http://www.msnbc.msn.com/id/23351894/

Carol M. Beach has a good article on Slate on the subject, written in 1997: http://www.slate.com/id/1053/

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