Battles by states over online taxes may yield little

Mon Oct 31, 2011 2:35pm EDT
 
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(Reuters) - America's state governments won't see many revenue gains any time soon if they triumph in battles to tax sales by out-of-state Internet retailers, a leading Wall Street credit-ratings group said on Monday.

Standard & Poor's Ratings Services said that state governments were increasingly targeting Internet sales outside their borders but still faced legal hurdles and were unlikely to see much top-line benefit soon.

"At this time, Standard & Poor's Ratings Services does not think that the amount of revenue states are foregoing by not collecting tax on Internet sales is significant enough to influence state or local ratings," S&P analyst David Hitchcock said in a report. "Nevertheless, Internet commerce is growing faster than overall retail sales, and if trends continue the loss of tax revenue could become significant."

California is among the states that have locked horns over sales-tax collections with online retailers such as Amazon.com Inc, but the effects on state revenue were far from clear, either in the near term or longer, according to S&P.

(Reporting by Michael Connor in Miami; Editing by Padraic Cassidy)