As Rusty says, do a search and you'll find a great deal of info and debate on the topic.
My read on it is that people have been doing it for years... often via a Montana LLC arrangement... and I haven't heard of a single member who has had legal problems because of it. There are documented reports of people getting caught and being found responsible for paying back taxes and penalties but these are still pretty rare.
Having said that, it seems clear that the economy is driving a number of states to go after every tax dollar they can and they are cracking down where they can. Strong arguments are made that the LLC arrangement is legal and there is nothing to worry about. I guess we pays our money and takes our chances.