States fire shots in Internet sales tax war

A battle is brewing over US state sales taxes on online purchases. Internet retailers Amazon.com and Overstock.com are scaling back their operations in states that demand they collect these taxes. While this won't dent their revenues much, it foreshadows a larger clash over the taxation of Internet commerce. Cash-strapped states are firing the first shots. Most online sales escape being taxed because Internet firms only collect them in states where they have a physical presence. (Buyers are legally bound to pay them, but many do not.) However, Amazon and Overstock allow independent companies to sell merchandise through their systems for a fee. This means the online giants have to collect taxes in any state where their independent partners have operations.