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TEXT OF STORY

KAI RYSSDAL: As I mentioned earlier, it's time to do your part for the greater good. Tomorrow's the 15th of April, if somehow it escaped your notice. The deadline, in most cases, is for state taxes as well as federal. Income and sales taxes are the states' two biggest revenue streams, and as they struggle to balance their budgets in a down economy, they're attacking a giant loophole. Congress has been dodging the issue, but states are starting to crack down on Internet retailers. California's been thinking about taxing music downloads, and come June, New York says it's going to start hitting up companies like Amazon.

From New York, the city, Marketplace's Alisa Roth reports.


ALISA ROTH: New York's legislature approved a budget for nearly $122 billion dollars last week, and it's already having trouble rustling up that cash. Nathaniel Trelease is an expert on taxation and e-commerce.

NATHANIEL TRELEASE: So when they see economic slowdown, they see their revenue shrinking, what they do is immediately turn to areas of enforcement that they hadn't emphasized in the past.

In a lot of states, that means hitting up Internet retailers. Some already pay sales tax, and those that have no physical presence in the state don't have to, but New York is going after companies like Amazon by arguing they have partners with a physical presence in the state. By dollar-value, Amazon is also the single biggest Internet retailer doing business here, but it's a complicated issue. Retailers and customers alike obviously have reason to oppose the effort, and Trelease points out that the Internet has really changed the nature of doing business.

TRELEASE: Even if you're selling a product out of New York, you're selling it in Colorado. You're selling it in California and into Texas. Really, there are no borders.

But he says, New York has no real jurisdiction to enforce the tax laws in those other states. Tom Bergin is spokesman for the New York State Department of Taxation and Finance.

TOM BERGIN: Obviously there's significant revenue out there if we could bring everybody in who's supposed to be in.

Bergin guesses New York will pull in an extra $100 million or so in the next fiscal year. Not a lot compared with a budget of more than $100 billion. In any case, Amazon is expected to fight the ruling in court.

In New York, I'm Alisa Roth for Marketplace.

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