Suppose you buy a book from a store in Rhode Island.

Now suppose you buy the same book from an online retailer such as Amazon.com.

Same buyer. Same book.

The only variant is the method of purchase. But that makes all the difference from a tax standpoint.

It’s what’s at the heart of a growing controversy nationwide.

It has to do with sales tax.

When you buy from a local store, the store must charge you Rhode Island’s 7-percent sales tax.

When you buy from an online retailer such as Amazon, chances are that the online retailer won’t charge you the sales tax.

You’re still responsible for paying the tax (technically known as a use tax), but most people don’t pay it, mainly because they’re not aware of it, said Jacquelyn H. Tracy, president of the Rhode Island Society of Certified Public Accountants.

“I don’t think a lot of people consider the use tax” when making such purchases, said Tracy, a partner in Mandel & Tracy, LLC, a CPA firm in Providence.

So what happens? You needn’t be a genius to figure it out. Fewer sales at local stores. Fewer employees at those stores that survive. And, in time, fewer stores overall.

From a tax standpoint, it means less revenue to pay for vital state services.

So what’s a state to do? The U.S. Supreme Court has ruled that a state cannot force an out-of-state retailer to collect a state’s sales tax unless the retailer has a substantial physical presence, or “nexus,” in that state.

And online retailers such as Amazon don’t have a physical presence in most states.

But New York last year enacted a new law, which has become known in tax circles as the “Amazon law.” It generally forces retailers such as Amazon to collect New York sales tax on certain purchases.

What about the U.S. Supreme Court’s ruling? Here, in a nutshell, is how New York gets around it:

Some authors, and others, in New York have Web sites that offer links to an online retailer for people who want to buy certain books.

The authors and others serve, in effect, as independent contractors, and often have formal affiliations or associations with the online retailer. For steering business a certain way, they receive a commission or other consideration when a purchase is made.

And that relationship is enough to pass the U.S. Supreme Court’s “physical presence” test, New York contends.

Amazon appealed, but New York Supreme Court Judge Eileen Bransten ruled in the state’s favor earlier this year.

New York’s new law, she said, “simply obligates out-of-state sellers to shoulder their fair share of the tax-collection burden when using New Yorkers to earn profit from other New Yorkers.”

New York’s Amazon law is getting the attention of other states. As of April 22, eight other states were considering their own version of the law, according to the Tax Foundation, which monitors fiscal policy at the federal, state and local levels.

And now Rhode Island is joining the fray. State Rep. Steven M. Costantino, D-Providence, head of the powerful House Finance Committee, has introduced a bill that contains language similar to New York’s law.

“I think it’s [an issue of] fairness to the business community,” including local bookstores and other such retailers that have operations in Rhode Island and thus are required to collect and hand over state sales tax, Costantino said.

“You can go on Amazon and you can buy a book on Amazon and it’s not necessarily through Amazon; it’s through another [party] using Amazon . . . ,” he said.

In such circumstances, no sales tax is collected, he said. This results in a “competitive disadvantage to those businesses that have invested in Rhode Island,” he said.

He’s right. But there’s more to it than just fairness, said Mark Higgins, dean of the University of Rhode Island’s College of Business Administration.

States are interested in adopting a New York-style Amazon law because they are strapped for cash, he said.

“States are looking for any kind of revenue they can get, and it appears as if New York has found a novel way of creating nexus,” he said.

Overall, Higgins added, “There’s no doubt [that states are] trying to figure out a way to tax Internet sales.”

And it’s about time. Sales of goods online have ballooned as use of the Internet has spread. E-commerce sales totaled more than $2.3 trillion in 2006, according to the U.S. Census Bureau.

As sales have risen, states and other governments that levy sales taxes have missed out on a lot of potential revenue — and will miss out on a lot more if they don’t act, according to a study issued last month by three professors at the University of Tennessee at Knoxville.

The study said that uncollected sales taxes on purchases made online will cost these governments nearly $7 billion in sales tax revenue this year.

Rhode Island will miss out on $17.7 million in uncollected sales tax on online purchases this year, and nearly $30 million by 2012, according to the study’s estimates.

That’s the sort of money that Rhode Island can’t pass up, especially given the state’s budget problems. (Rhode Island faces a budget deficit of $70 million for the year that ends June 30, and a deficit of $590 million for the year that starts July 1.)

Let’s be clear: This isn’t about keeping the Internet a tax-free zone. It’s not about taxing Internet access.

It’s simply about fairness. You can’t have one set of rules for local stores and another for online retailers. It’s not right. And if consumers fail to fork over the use tax that they’re obligated to pay, states have to find other ways to enforce the rules.

Adopting New York’s Amazon law wouldn’t result in a windfall for Rhode Island. But it’s a step in the right direction.

TODAY’S TIP: Costantino’s bill is H6164. It’s been scheduled for a hearing before the House Finance Committee on Tuesday.

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