New laws turn Web retailers into tax tattlers

An increasing number of politicians, concerned with shrinking budgets and eyeing continuing growth in e-commerce, want to force out-of-state retailers like Amazon.com, Overstock.com, and Blue Nile to tattle to tax collectors about how much in sales taxes their customers have avoided paying.

At the moment, for instance, Amazon customers in California don't pay sales tax but are supposed to voluntarily write a check for the full amount on tax day--the concept is called a "use tax." Few people do. Tax collectors view it as a loophole that can be closed by requiring Amazon to share customer data with the government.

"This is Big Brother--it's the purchasing police," says Steve DelBianco, executive director of NetChoice, which counts eBay, Overstock.com, and Yahoo as members and says the proposals are probably unconstitutional.

Colorado recently adopted such a measure, which says retailers must divulge the total purchases "made by each Colorado purchaser during the prior calendar year"; they also must forward a more detailed list to every customer accompanied by a warning that paying use taxes is mandatory. A similar proposal in the California legislature will be the subject of a hearing next week, and a Tennessee bill is scheduled for discussion on Thursday.

For more on this article, read New laws turn Web retailers into tax tattlers on CNET News.