ICSC leaders claim the study is "particularly ominous" given significant revenue shortfalls being faced by communities across the US. Many states require online retailers or their customers to pay sales tax on purchases, though current enforcement of those rules is weak.

"Clearly the results of the study points to the need for Congress to enact legislation that will allow states to collect taxes from out-of-state sellers while promoting simplification and fairness in the administration and collection of sales and use taxes," says Betsy Laird, ICSC vice president of global public policy. The New York City-based group strongly supports the Streamlined Sales and Use Tax Agreement, which substantially simplifies state and local sales tax systems.

According to the Tennessee study, annual losses of state and local sales tax to electronic commerce will range between $11.4 billion and $12.7 billion through 2012. The study does not include taxes due from catalog, television and mail-order sales.