The Collection of Sales and Use Taxes on Internet Sales 
Legislation Necessary to Level the Playing Field

The e-Fairness Coalition does not support new taxes on Internet sales. Sales 
made over the Internet are already subject to sales and use taxes. We support 
leveling the playing field so all retailers – in-store, online, and catalogue – 
have the same collection responsibility. Congress should enact legislation 
allowing states to treat all retail sales equally.

Current Law

Under current law, sales and use taxes are already in place on all remote sales. 
If the remote retailer has a physical presence (or nexus) in the state of the 
buyer, the retailer is required to collect and remit the sales tax. However, 
under the Supreme Court’s Quill decision, if the remote retailer does not have a 
physical presence in the state of the buyer, the retailer cannot be required to 
collect sales tax. In cases where the retailer does not collect the sales tax, 
the buyer is required to pay the use tax to their home taxing jurisdiction. The 
use tax is not widely understood and compliance is very low. The Quill decision 
has resulted in a situation where Amazon.com does not collect sales taxes, but 
Borders.com, which has physical stores in most states, is required to 
collect sales taxes. This inequitable situation should not be allowed to 
continue.

Meaning of “Extend the Moratorium”

The Internet Tax Freedom Act of 1998 banned taxes on Internet access and it 
banned multiple or discriminatory taxes on electronic commerce. The Internet Tax 
Freedom Act did not ban the collection of sales and use taxes on sales made over 
the Internet. This issue is not widely understood and is regularly 
mischaracterized in the press.

Merely extending the moratorium will not address the main issue of allowing 
states to require remote retailers to collect and remit sales taxes. Extending 
the moratorium will only delay a decision on this issue and allow the current 
inequitable situation to continue.

Responsible Congressional Legislation is Necessary

The current sales tax rules and definitions of the various states and localities 
are overly complex and must be simplified. To implement streamlined sales tax 
systems, we recommend that Congress enact legislation authorizing states to 
develop and enter into an Interstate Sales and Use Tax Compact. The legislation 
should provide that states joining the Compact will be required to adopt a 
simplified sales tax system. States adopting the simplified system would be 
authorized to require remote sellers above a sales volume threshold to collect 
use tax on all taxable sales into a state.

Providing a framework for simplification, and allowing states to require 
collection when the states achieve simplification is a reasonable and necessary 
step for Congress to take. Merely extending the moratorium is an empty gesture 
that does not solve the real problem.

The e-Fairness Coalition includes brick-and-mortar and online retailers, retail 
 corporations and associations, publicly- and privately-owned shopping centers, 
outlet centers and  independently owned shops. The coalition advocates fairness 
for businesses and consumers. It supports a  level playing field that ensures 
consumers are treated fairly regardless of where they choose to shop.