Congress should enact consistent sales-tax laws to even playing field for Main Street businesses

A HANDFUL of states are making some online retailers, such as Amazon.com and overstock.com, adjust their marketing strategies as states try to collect every possible penny of sales taxes to fill recession-dashed budgets.

More about the particulars in a moment, but the real solution to these state-by-state dust-ups is consistent sales-tax collection across the country. That means federal legislation that requires all retailers — down the street, via catalog, or online — to collect sales taxes and remit them to the states.

In 1992, the U.S. Supreme Court ruled it was unreasonable to expect a catalog retailer to know and administer the tax collection laws of all U.S. states. The rule became remote retailers had to collect a state's sales tax only if they had a physical presence in the state — a rule that seems even more discordant with the rise of online retailing.

Since then, Washington has joined 22 other states participating in the Streamlined Sales Tax Project, a voluntary effort in which states are aligning and simplifying laws to reduce the burden on retailers having to comply with vastly different state rules. Those states represent about one-third of the U.S. population and, arguably, a critical mass to nudge Congress to act.

The need is urgent — now more than ever as states attempt to collect every bit of revenue. In Washington, citizens buying goods out of state and not paying sales tax will cost state and local government about $385 million this year. That could have saved at least scores of state jobs or programs as the Legislature cut deeply to fill a $9 billion budget deficit.

So far, New York, North Carolina and Rhode Island are going to extra lengths, requiring remote retailers to collect taxes if they have only a marketing affiliate residing in the state, rather than a store or office. That could be a resident who runs a Web site with only a link to an online retailer. The result is that online retailers are ending these relationships rather than pay the tax.

This conflict is about competitive advantage, but it depends on whose advantage and whose disadvantage. Local retailers are at a serious disadvantage when online and catalog retailers don't charge sales tax. Meantime, online retailers argue they shouldn't have to collect sales tax if other online retailers, most notably retailers using eBay, do not.

Truth is, local retailers are not the only ones at a disadvantage. So are taxpayers who buy mostly in state and are carrying their online-shopping neighbors.

Time for Congress to rectify this terrible imbalance.