Should Amazon Pay Sales Taxes?

NEW YORK (TheStreet) -- Should Amazon (AMZN) be forced to pay sales taxes? That's the question being asked as the e-commerce giant threatens to sever ties with affiliates if forced to pay up.

While this has been an ongoing debate, the dispute has recently escalated, as states seek ways to bolster their revenues to close their budget deficits coming out of the recession. One way to do this would be through sales taxes.

In the past, Amazon has been protected by a 1992 Supreme Court ruling (Quill Corporation v. North Dakota) that prohibits a state from forcing a business to collect sales tax unless it has physical stores in the market.

>>Retailers Make Pitch to Amazon Affiliates

But while taxpayers in most states are required to pay the tax directly to the government, few actually do.

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Currently, Amazon collects sales tax in five states -- Kansas, Kentucky, New York, North Dakota and Washington -- the only markets where it has stores or offices. But if other local governments have their way, this could soon change.

Several states are seeking to get around these restrictions by passing laws that expand the definition of physical presence.

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