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It seems fundamentally unfair as a competitive practice that some business can underprice others by gaming the state tax and state labor laws costs by moving their businesses out of state or offshore. Lack of state tax revenue also allows both business and people to use services they do not pay for. In a state with no income tax, especially, this results in significant lost revenue.
The issue of e-commerce and taxation, however, is really a minor issue within the larger issues of the impossibly labyrinthine tax code of the United States. It would be much better for the economy if the US adopted a straight forward progressive income tax, with minimal deductions and an equally straightforward value-added tax, determined federally, with a percentage of each going to the states, rather than having tax system gaming distorting economic fundamentals, and the political system (via congresspeople getting tax breaks for pet causes, usually in return for campaign contributions).
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