General Online Sales Tax Issues

With the projected Internet sales growing at an exponential rate, it is no surprise that states have begun targeting online retailers in order to meet state budget requirements.  As with any new legislation, there has been an abundance of both, support and criticism regarding the taxation of Internet sales.  From constitutional challenges to practicality concerns, the selections below highlight some of the most compelling arguments on both sides.

The Streamlined Sales and Use Tax and Agreement (SSUTA)

Jeff Van Wychen, Pros & cons of sales tax change, Oct. 15, 2008, Twin Cities Daily Planet,

Walter J. Baudier, iBrief, Internet Sales Taxes from Borders to Amazon: How Long Before All of Your Purchases are Taxed?, 2006 Duke L. & Tech. Rev. 0005 (2006),

Amy Cobb, Sales and Use Taxation of Internet Sales, 2001, Chicago Kent College of Law - Honors Scholars Seminar Papers,

Thomas Cornett et. al, Taxing Internet Purchases - The Pros and Cons, Leader's Edge, October 1, 2000,

Affiliate Tax Issues

The United States Supreme Court in Scripto v. Carson, 362 U.S. 207 (1960), and Tyler Pipe Indus., Inc. v. Wash. State Dep't of Revenue, 483 U.S. 232 (1987), held that an out-of-state seller will have nexus by attribution of a third party's in-state activities when: the third party is acting "on behalf of" the out-of-state seller; and the third party's activities are "significantly associated with the taxpayer's ability to establish and maintain a market in this state for the sales."  In other words, a company is subject to taxation in a state if the company has substantial ties with that state.

Due to recent efforts to boost revenues, several states have relied on the holdings of Scripto and Tyler Pipe in passing laws to enforce the taxation of Internet sales from retailers who use in-state affiliates.  Affiliates are individuals or companies within a particular state that maintain websites and receive compensation for linking to Internet retailers, such as  The rationale behind the legislation is that the use of affiliates creates a substantial nexus with the state.  These laws have been met with great opposition, which has led to controversy regarding their enforcement and effectiveness.

The articles below highlight the arguments for and against state efforts to enforce the taxation of online retailers through affiliates.

Sarah Weinman, States Amazon Tax Seems to Hurt Revenue, Not Boost It, Mar. 8, 2010,,

Geoffrey A. Fowler, Amazon Cuts North Carolina Affiliates to Avoid Tax, June 27, 2009, WSJ,