California and New York lead the 10 big states currently taxing shoppers online, Forbes.com reports.

Consumers like the ability to shop online and avoid paying state and local sales taxes, and many online retailers like the competitive advantage the arrangement provides them over “bricks and mortar” businesses across the country, Forbes reported.

Such retailing giants as Wal-Mart, Apple, Dell and Amazon.com lead the parade of retailers hitting shoppers with state and local taxes. Alaska, Delaware, New Hampshire, Montana or Oregon have no sales taxes.

Here, as of April 2013, are the 10 biggest population states that have moved to tax e-commerce:

• 1. California: A state law took effect in September 2012 requiring out-of-state sellers who have in-state marketing or corporate affiliates and more than $1 million in sales a year to Californians, to collect the state’s hefty sales tax (7.5% statewide, but as high as 10% with local add-ons) when shipping goods to its 38 million residents.
• 2. Texas
• 3. New York
• 4. Illinois
• 5. Pennsylvania
• 6. Georgia
• 7. North Carolina
• 8. New Jersey
• 9. Virginia
• 10. Massachusetts

To be sure, online taxes are stirring up controversy.

Illinois Sen. Dick Durbin, the Senate Democratic whip, recently blew up a bill that would have provided Americans with a permanent ban on the taxation of Internet service.

“It’s really not fair to say to that store down the block that’s paying rent and paying property taxes and collecting sales tax [that] we’re going to put them at a disadvantage to their Internet counterparts,” Durbin said.

Durbin has called on Congress to take up the Marketplace Fairness Act, something he’s been supporting for years. It would give state and local governments the ability to require online retailers to collect and remit sales taxes for online purchases to the places where the purchases were made.

Durbin says several online retailers, including Amazon, support the proposal.

Durbin says local merchants are becoming “showrooms” as consumers visit local stores and shopping malls to research products and then go home to make their purchases online.

He says that, by not collecting sales taxes, online retailers enjoy a five- to 10-percent advantage in price.

Reports indicate that, for this most recent Thanksgiving holiday shopping weekend, local stores and shopping malls across America “had flat sales compared to last year,” but Durbin says online retailers saw a 30 percent increase from the same weekend last year.

While not all of those sales were due to a shoppers’ ability to avoid sales taxes, Durbin says losing taxes leaves state and local officials with few options.

“Unlike the federal government, states and localities can’t run deficits” to pay for necessary services such as police and fire protection and other community services, Durbin said. “The only option they have is to raise other taxes, like property taxes, or to cut vital services.”

Newsmax Finance Insider Stephen Moore says "Grinch Durbin says he will only allow a permanent ban on Internet access taxes, if Congress votes to allow state/local sales taxes on Internet purchases."

Moore explains: "It’s a game of pick your poison."

"This may seem like arcane stuff, but the economic stakes are gigantic, as is the future expansion of Internet services."

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