Rep. Jackie Speier at center of online tax debate

SAN JOSE, Calif.

As revenue-starved as the state is, you know that it's not just California that would love to collect more sales tax revenue. Depending on whom you ask, states are losing between $4 billion and $11 billion a year when sales taxes aren't collected from online shoppers. The issue has generated both strong support and strong opposition.

"If they don't get the best deal, they don't feel like they've done their homework. They don't feel like they've shopped well. They don't feel smart," Ann Seaton says. She manages Hicklebee's, a popular bookstore along Lincoln Avenue. Small businesses complain that they lose sales to consumers who take advantage of tax-free online shopping. A bill co-authored by Peninsula Congresswoman Jackie Speier is making its way through the House in Washington to require all online retailers to collect sales taxes

"If a Republican from Arkansas and a Democrat from California can come together on a bill that deals with tax issues, then the time has really come to finally resolve this issue," Speier says. However, the tax bill is getting strong opposition from big companies in Silicon Valley including eBay. In an emailed statement, eBay said, "Small business retailers using the internet should be protected from any new internet sales regime so that they continue to advance and grow."

Consumers say a uniform online sales tax might change their buying habits. "It probably would a little bit. San Jose resident Pam Gross says. "I'm used to it. Yeah, it probably would make a little difference." Santa Clara University professor Kirthi Kalyanam suggests online shoppers might even shift to big internet stores like Amazon because they're large and can adjust prices to offset the tax. "That demand is now going to shift either back into the regular retail channel, brick and mortar channel, or it's going to move over to some of these stronger players like Amazon. So, one never knows. Amazon could benefit net net out of this," he says.

If passed, the online tax bill will require online retailers to sift through 9,600 different tax rates around the country depending on where their customers live. However, main street retailers only have to charge one tax rate based on the point of sale.

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