Tax Break Nears End For Online Shoppers

Republican Governors, in Need of Revenue, Drop Opposition

BY MONICA LANGLEY

Republican governors, eager for new revenue to ease budget strains, are dropping their longtime opposition to imposing sales taxes on online purchases, a significant political shift that could soon bring an end to tax-free sales on the Internet.

Conservative governors, joining their Democratic counterparts, have been making deals with online retail giant Amazon.com to collect state sales taxes. The movement picked up an important ally when New Jersey Gov. Chris Christie—widely mentioned as a potential vice-presidential candidate—recently reached an agreement under which Amazon would collect sales taxes on his state's online purchases in exchange for locating distribution facilities there.

Mr. Christie called taxation of online sales "an important issue to all the nation's governors" and endorsed federal legislation giving all states taxing authority.

"Having one of the most recognized and widely popular Republican leaders take this position gives other politicians comfort that the online sales tax is fair and helps state budgets in crisis," said Scott Mason, a vice president at Lowe's Cos. The retailer says it has a 5% to 10% price disadvantage compared with online rivals, with some customers using its stores to pick products and then ordering them online to avoid sales tax.

The move toward taxing online sales has broad implications. Online shopping will become more expensive for consumers. Brick-and-mortar retailers won't have the price disadvantage they now have compared with online sellers. Strapped states suddenly could be flush with $23 billion in new annual revenue, according to the National Conference of State Legislatures.