Indiana will become the fourth state to reach such an agreement with Amazon, but the governor said he will continue to push for federal action to address the issue of how states should tax out-of-state internet-based retailers.

“The only complete answer to this problem is a federal solution that treats all retailers and all states the same. But for now, Amazon has helped us address the largest single piece of the shortfall, and we appreciate the company working with us to find a solution,” said Daniels.

According to the agreement between Amazon and the Indiana Department of Revenue (DOR), the company will voluntarily begin to collect and remit Indiana sales tax beginning January 1, 2014 or 90 days from the enactment of federal legislation, whichever is earlier. The state will not assess the company for sales tax for other periods.

Estimates of uncollected online sales taxes in the state are about USD75m each year. Of that, the State Budget Agency and DOR estimate that revenue from sales tax remittal by Amazon would be approximately USD20m to USD25m per year.

Local 'main street' retailers in the US are currently looked at as having a competitive disadvantage because they must collect sales taxes at the point of sale, while out of state retailers give their customers an effective discount by collecting no state or local sales taxes. However, several states are seeking to 'level the playing field' (and replenish their coffers) by passing laws which deem an out-of-state company to be an in-state company for sales tax collection purposes if the company receives commissioned referrals from in-state resident "affiliates".

Last November, the US House of Representatives Committee on the Judiciary held a hearing on the limitations on states’ authority to collect sales taxes on e-commerce, and received conflicting advice from such internet businesses as Amazon.com and eBay Inc.

In his testimony to the Judiciary Committee, Amazon's Vice President for Global Public Policy, Paul Misener, said that the company "strongly supports enactment of a federal bill with appropriate provisions”, but that the company “has steadfastly opposed state attempts to require out-of-state sellers to collect, absent congressional authorization".

"Congress should authorize the states to require collection, with the great objects of protecting states’ rights, addressing the states’ needs, and levelling the playing field for all sellers," he told the committee.

His testimony was, however, in direct contradiction to that of Tod Cohen, Vice President and Deputy General Counsel, Government Relations, of eBay, who noted that data shows that in-store retail will represent 93% of all retail in 2012, with online retail taking just 7%, and that nearly 45% of in-store sales are web-influenced, as most large retailers operate stores, internet and technology services.

“The world of retail is bigger than remote state sales taxes,” he stated. “When you think big picture, the higher shipping costs alone often tip the balance away from smaller retailers. There are also many direct tax benefits enjoyed by the largest retailers that never flow down to their small business competitors. These include state and local property tax breaks and sales tax exclusions.”

It is estimated that, in 2012, states across the country will lose as much as USD24bn in uncollected state and local taxes on internet and catalogue sales.

Proposed legislation currently sitting in both arms of Congress would provide states who choose to use it with the clear authority to require retailers to collect sales taxes already owed; require a list of simplification requirements to ease administrative burdens for sellers; exempt small businesses from collecting sales taxes; compensate online retailers for startup administrative costs associated with collecting the taxes; and release consumers from their existing sales tax remittance obligations.