Matt Enders was one of about eight small business owners lobbying legislators Tuesday against what's being called the "Amazon tax." He says his business, and those of thousands across the state, could be ruined if the state tries to collect taxes from online shoppers.

Enders runs an affiliate marketing management company out of an office in Cary. Affiliate marketing is when a business rewards affiliates, or partners, for traffic generated through the affiliates' websites or blogs.

"You have a blog that gets traffic and you want to monetize some of that traffic by referring your unique visitors to some merchant through what's called affiliate marketing," said Enders. "You send your traffic there and every time your traffic makes a purchase, you get a commissioned sale."

Enders says affiliates range from individuals who make a few hundred dollars a month in commissions to large companies with multiple employees. Through "click through" buttons on their websites, they help generate traffic for online merchants like Amazon.com and Overstock.com. The merchants avoid paying sales tax by not having a physical presence in the state, and buyers benefit from saving a few dollars on each purchase.

But Senator David Hoyle, co-chair of the Senate Finance Committee, says it's not fair, especially when the state is in a budget crisis. Sales tax from Amazon.com alone could run as much as $13 million a year.

"We're talking about hundreds and hundreds of millions of dollars that's due to the state of North Carolina that we're not collecting and it's not right," he said. "It's not fair to Books-A-Million, it's not fair to Belk, or these other retailers who have mortar and investment and employees in this state that are collecting the sales tax from the merchandise that they sell."

New York's decision to begin collecting the tax in 2008 was immediately challenged by on-line retailers. A Supreme Court ruling in January 2009 upheld the on-line sales tax in that state, saying that using affiliate marketers who live in New York constitutes a physical presence or "nexus" in the state and thereby justifies the sales tax.

At least ten other states are now considering a tax, and a longstanding movement to create a "streamlined" tax nationwide is regaining momentum in Congress.

"It's a legitimate tax that is owed to this state," said Hoyle.

Enders and his colleagues argue the anticipated revenue will be offset by the loss of business for affiliate marketers, who he says number in the tens of thousands in North Carolina. He points to companies like Overstock.com that have terminated contracts with affiliates in New York.

Senator Hoyle said while he sympathizes with small business owners, he believes on-line retailers aren't willing to give up the revenue, even if it means paying tax.