Case law dictates that web-only retailers cannot be compelled to collect state sales taxes unless they have a physical presence in the state in question.
For instance, a Colorado order placed on Amazon.com might be fulfilled from a warehouse in Arizona, allowing the company to avoid collecting Colorado tax.
That sounds great to shoppers, but sales taxes pay for all kinds of government services from schools to firefighters.
Under state law, shoppers are supposed to voluntarily pay taxes on online purchases, but that simply doesn't happen.
"It's diminishing our tax base in the state," Colorado Joint Budget Committee Chairman Sen. Pat Steadman (D) said. "It's going to cause an increasing problem for the state budget."
Retailers argue the system is unfair to companies that have physical shops and sell merchandise online.
"We're at an 8 percent disadvantage from the get-go," Colorado Retail Council President Chris Howes said.
Howes hopes that Congress will advance one of two bills aimed at allowing states to force online retailers to collect sales tax.
It's unclear whether the issue will be seen as pressing enough to pass in the lame duck session.
(KUSA-TV © 2012 Multimedia Holdings Corporation)