An article in The Wall Street Journal described the extent to which online retailers, such as Amazon, may have to go to in order to reduce their tax costs. States and localities are feeling the squeeze on their revenues due to the recession and want to pass the pain on to Amazon.com and other online retailers seeking to avoid collecting sale taxes.

Collecting sales taxes In all states, according to the article, would evaporate 1.4% of Amazon’s revenues. A loss of revenues is not good news for investors. Passing on sales taxes to consumers does not bode well for promoting use of broadband for commerce either.

The state budget crisis is catching up to online retailers like Amazon. A report in The New York Times tells us about a new law in Illinois that compels Amazon to collect taxes from residents of Illinois that purchase Amazon’s products as a result of being directed to Amazon by one of its affiliates.

Affiliates are companies that place links to Amazon on their websites. The affiliates get paid a commission when a consumer links to Amazon via the affiliate’s site and makes a purchase.

I have to disclose that I have an affiliate arrangement with Amazon, so when I say this, I say it with the utmost authority: taxing Amazon is the fair thing to do. Every other American and every other brick-and-mortar store that has a website has to pay taxes on the income they generate. Amazon should pay its fair share as well.

Will there be a catastrophic impact on the use of the Internet? Of course not. We are Americans. We like to consume and we are used to paying taxes. This is not to say we would pay them without fussing and cussing, but my intuition tells me that the convenience of shopping online will offset any sensitivity to price change caused by Amazon having to raise prices a bit in order to collect sales taxes.