Yearning For a Way to Collect Tax On Out-of-State Vendors

For years lawmakers in state houses across the land have yearned for ways that they could collect their respective state sales taxes on purchases by their constituents from out-of-state vendors who did not have a storefront in their state.

Initially, the issue focused on catalogue sales and then sales by telephone and, more recently, sales made over the Internet. In the latter case, purchases literally exploded as the ease of making Internet purchases made out-of-state vendors much more accessible to consumers. It is this explosion in e-commerce that set off the bells and whistles of state lawmakers across the land as Main Street businesses began to complain of the unfair competition because out-of- state vendors’ prices were not bridled with the state sales tax.

States where a vendor has presence, or what is called nexus, have no problem in getting those vendors to collect and remit the state’s sales tax on goods delivered across state lines. The problem arises for those vendors who do have a physical presence in a state where customers have placed orders for goods to be shipped to them. The courts found that forcing vendors to collect state sales taxes on purchases made by customers located in a state where the vendor has no physical presence imposed a hardship on those vendors and infringed on the Interstate Commerce Clause.

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