Taxing of Internet Purchases

[Alex]

I'm in favor of these laws and Amazon's response to them as it made Roger Ebert's Twitter stream easier to tolerate (he would post stuff just to drive purchases as a way to support his online habits, but Illinois is one of the states that recently ran into this and so he was cut off from that stream).

On the other hand, Adam Carolla's podcast is going to have issues if Amazon is really a significant portion of how he justifies that (about 6 weeks ago he spent a fair amount of time talking about how it was the success of the Amazon sponsorhip that convinced him to reject a multimillion multiyear terrestrial radio deal).

While as a consumer, I would prefer they didn't collect tax, I don't understand WHY this is the case: why shouldn't online retailers collect sales tax? Obviously I need to look into this more for the ruling.

It isn't so much "why" as "how." Stores argue that they can't possibly be experts in collecting and dealing with taxes for every jurisdiction that one of their customers might transport the purchased goods to. Especially if they don't otherwise have any presence there (the argument being that there really isn't any fundamental difference between me driving to Vermont and driving back with a pint of Ben & Jerry's vs. them mailing it to me).

And mail order companies went through this more than a century ago which is why most state laws need to be adjusted to deal with modern ecommerce.

This is why, technically, when you currently buy books from Amazon (or a refridgerator in Nevada) you are supposed to voluntarily send the sales tax (aka "use tax") to the state of California. Of course, nobody does this and that is why when a huge volume of business moves into otherwise untaxed channels, the states start to bitch about it.

The law doesn't so much create a new obligation for businesses to pay sales tax as change the definition of what it means to have a business presence in the state. And it makes some logical sense. If Amazon paid a person to sit at a cart in a mall and sell people stuff via a laptop they'd have to pay taxes, but if they instead pay that person to do it from their own home, they don't.

It's one of those situations where everybody involved is 90% right.