Many Internet-only retailers do not collect sales tax on their sales except in a few states where they have a physical presence or nexus. Amazon.com may be the largest of them all and certainly must be the most well-known, but by no means are they the only ones. There are many online sellers large and small who do not collect sales tax everywhere they ship product. Internet sellers have generally followed Amazon’s lead and taken the position that since they don’t have physical presence, they don’t have “substantial nexus” and therefore states can’t force them to be tax collectors. States have struck back with a variety of so-called “amazon laws” attempting to assert that these online sellers do in fact have at least a type of physical presence through so-called “click-through affiliates” and other agents in the state.
Online-only sellers usually collect tax in just a few states. This contrasts sharply with traditional retailers that have “brick-and-mortar” stores. These traditional retailers who also make substantial sales online (see walmart.com, bestbuy.com, etc.), almost universally collect taxes on their online sales. And with an estimated $170 billion dollars in online retail sales in 2010 according to the National Retail Federation, It’s become a huge issue. It’s a big deal for states starving for revenues and for small/local as well as large/international companies who may or may not be collecting tax on online sales.
