Independent retailers are calling for the closure of a tax loophole that allows cheap CDs and DVDs into the UK.
Larger retailers say they are simply offering customers the best deal
More than 100 firms from the Forum of Private Business (FPB) have written to the Treasury arguing the law poses a threat to small High Street businesses.
But retailers importing the CDs say consumers benefit from lower prices.
Under current tax laws shoppers do not have to pay VAT or import duty on goods brought in from outside the European Union (EU) that cost less than £18.
Larger retailers, such as supermarket giants Tesco and Asda, have taken advantage of the current rules to sell cheaper CDs and DVDs imported from places such as Jersey.
However, the FPD said independent retailers were being driven out of business because they could not compete.
In their letter they have called for the tax threshold on imported goods to be lowered to the minimum EU level of 10 euros (£6.80) from the current maximum level of 22 euros.
The move would mean CDs and DVDs would no longer be duty free.
Over the past 18 months, Asda and Tesco have launched offshore operations selling chart CDs from Jersey.
Jersey has no VAT on goods sold there, and, as long as items cost less than £18 and are posted individually, HM Revenue & Customs cannot impose tax when the goods are brought into mainland UK.
Asda and Tesco say they are merely offering the best deal for customers.
But the FPB has argued that Jersey is "essentially" part of the UK - with a UK postal address while record companies also supply the island with UK versions of CDs.
'Level playing field'
"Firms who sell goods such as DVDs and CDs from UK high streets have no such advantages and many are being driven out of business simply because they cannot compete with their rivals' artificially low prices," said FPB chief executive Nick Goulding.
"In simple terms all retailers want, surely not unreasonably, is for the re-introduction of a level playing field.
"The situation is unsustainable and there are small retailers across the country who can't continue to be undermined in this way," Mr Goulding added.
He added that the Treasury was losing an estimated £200m a year as a result of the loophole
The letter - signed by 120 firms including the chains Fopp and Music Zone - comes as record industry representatives are set to discuss the matter at a meeting with the Treasury later.