Follow up: States implementing voluntary interstate online sales tax compact Ecommerce Times: Beginning Oct. 1, at least 18 states will collect taxes from online sales voluntarily, offering a year of amnesty to companies that have not reported online transactions in the past. The five year old Streamlined Sales Tax Project came about from several lawsuits from states seeking taxes from online and mail sales. 40 states have shaped this initiative, meeting frequently with retailers to decide on incentives to bring businesses into the voluntary program. The 18 states have contracted software vendors to create free tax collection and remittance software for online merchants participating in the program, starting this fall. Retailers Signing Up Online merchants will collect and remit taxes for sales originating in any of 11 states that have fully amended their state laws to comply with the project's standards. In the other seven states, collection is optional until their tax codes are brought into compliance. In either case, taxes that retailers collect are based on the rates in effect where the buyer lives and retailers will be compensated for the cost of collecting and remitting that revenue to the states. More than 30 major retailers already have agreed to join the program One of the main selling points of the program to businesses is the offer of one year's amnestyto companies that may not have been reporting their sales diligentlysaid the Council on State Taxation, in Washington, D.C.. Legal Action Major retailershave been tied up in legal battles over whether they owe sales taxes for online purchases On May 31, a California state appeals court ordered Borders.com, the online division of the bookseller Borders Group (NYSE: BGP) Latest News about Borders Group, to pay US$167,000 in back taxes, because the company allowed customers to return products at their physical stores. Illinois sued Barnes and Noble, Blockbuster, Gateway and several other major retailers in 2003 for failing to pay millions of dollars in taxes on Internet sales. Wal-Mart.com, Target and its affiliate Target.Direct, and Office Depot (NYSE: ODP) Latest News about Office Depot settled those lawsuits in December 2004, paying the State of Illinois $2.4 million. States supporting the plan hope others will join their initiative and press Congress to pass legislation to overturn a 1992 Supreme Court ruling, in which the justices ruled that mail-order merchants -- and, consequently, online merchants -- did not need to collect taxes in states where they did not maintain a physical presence. Because of the extremely variable tax laws in different states, the court reasoned that tax collection would be an undue hindrance on interstate commerce. Legislators introduced bills in 2000 and 2003, but they did not reach the House or Senate floor. A revised bill is being offered Revenue Lost Online sales accounted for more than $104 billion in 2003 and state and local governments lost an estimated $15.5 billion in revenue, because they could not effectively collect sales and use taxes on e-commerce purchases, according to a report commissioned by the National Governors Association and the National Conference of State Legislatures.Full members of the project include Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, North Carolina, Nebraska, Oklahoma, South Dakota and West Virginia. New Jersey will become a full member Oct. 1. Arkansas, North Dakota, Ohio, Tennessee, Utah and Wyoming are associate members. Nevada and Hawaii are in negotiations to join