It's time to strike down the 'Amazon exemption'

[Commentary] If I want to buy the hot new videogame Mass Effect 3 and have it delivered to my home in New Jersey, I have a few choices. I can go to Amazon.com and pay $59.99. Or I can go to BestBuy.com and pay $59.99, plus New Jersey sales tax of 7%, for a grand total of $64.19. Almost no one would choose to shell out the extra $4.20 that Best Buy (BBY) is charging, and therein lies the problem for traditional retailers.

It's the dirty not-so-little secret of online and catalogue shopping: Buy from a retailer that doesn't have a physical presence in your home state, and you avoid state and local taxes on your goods at the time of purchase. Technically, if I buy Mass Effect from Amazon (AMZN), I'm required to send my $4.20 to New Jersey's coffers on my own. Yeah, right. Plenty of people don't even realize they're supposed to be sending that money in -- I didn't before I wrote this column. (Amazon collects taxes in only five of the 50 states.) Ask any tax expert or economist what percentage of these taxes is ever collected from consumers, and he will tell you it's virtually zero. It's a great bargain for shoppers but a huge, unfair advantage for the online retailers, which have been beating up their brick-and-mortar counterparts for years. And it's a double whammy for state tax coffers: Not only do the online retailers not collect sales taxes on what they sell, but they are helping put chains like Borders and Circuit City out of business, shutting off what was once a spigot for state and local revenue.