With the economy in the doldrums, states facing budget gaps are increasingly looking to boost tax revenues from internet sales -- a move opposed by online retailers including Amazon.com. New York has become an early testing ground for these efforts, with Amazon.com mounting a court challenge to a new state law that makes some out-of-state online retailers collect sales tax from New York buyers.

Today, Amazon was dealt a blow when a New York judge dismissed the company's lawsuit. But this could be a skirmish in a longer legal war.

It wasn't immediately clear if Amazon would appeal the decision. An Amazon spokeswoman said the company had no comment on the judge's decision.

AP recently explored the pressures state governments are under to make up budget shortfalls, and noted that internet sales tax breaks "are starting to erode." The story noted one estimate that governments could collect up to $3 billion if web retailers are required to collect taxes on all sales.