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Cyber Monday 2011 was the biggest online shopping day in the history of the Internet, shattering all previous years’ records. Online shopping the Monday after Thanksgiving was up 33% over last year, with consumers spending $1.25 billion on e-purchases.

Almost all states require local mom and pop stores, as well as big box retailers down the road, to collect sales taxes on the purchases you make.  But when it comes to out-of-state online retailers, states lack that power due to a 1992 Supreme Court ruling.

West Virginia, for example, has done the math and figures online shopping costs the state $100 million a year. A Florida lawmaker estimates Cyber Monday alone cost her state $40 million this year.

The convenience of online shopping is undeniable, but it’s impossible to overlook the glaring problem it presents for state sales tax collections, as highlighted by Cyber Monday. See our recent op-ed in New York Newsday for the whole story.

The federal government has been dragging its feet on requiring Amazon.com, Overstock.com and other online retailers to live up to exactly the same standard as brick and mortar stores.  But a Capitol Hill hearing this week is giving some hope that Congress will soon consider legislation that overrides the 1992 court ruling and paves the way for states to collect sales tax revenues.

There are big dollars at stake for state governments and a big price disadvantage for local businesses if the laws don’t change. State budgets are bearing the real burden of a three-year recession, and tax revenues lost to cyber shopping really add up.

For all of our sakes, let’s hope Congress acts quickly!

Photo of Shopping Online via USA.gov Creative Commons Attribution License 2.0