A Wall Street Journal article (March 17, 2011) describes a move by retailers such as WalMart and Target to force internet merchants to collect sales tax – a much needed source of revenue for struggling states. The move has resulted in Amazon de-listing their affiliates in Illinois and canceling a distribution warehouse in Texas.  A sample of prices for products (branded camera, TV and playstation) suggest that the price advantage for Amazon.com for those  products is the sales tax not collected.  Some states claim that if Amazon.com has a warehouse and the product flows through, then local sales taxes should be collected.  Is it reasonable for etailers to compete based on sales tax not collected (thus leaving the responsibility to consumers during their income tax filings) ? Should ecommerce retailers be forced to collect local sales taxes based on the flow of their product through distribution centers ? What will be the effective source of competitive advantage for etailers i.e., will the consolidation benefits from shipping from the warehouse be sufficient ?