The fight over Internet sales taxes

We’re more than 20 years into the mainstream Web era—20 years!—and Congress is finally seriously considering force retailers to collect sales taxes online, ending a loophole that has given online-only retailers an unfair advantage over physical retailers.

Thanks to a catalog company’s 1992 Supreme Court victory, states can’t require retailers that don’t have a physical presence within their borders to collect sales taxes on transactions done living in the state. That ruling predated the Mosaic browser by less than eight months, and combined with inaction at the federal level, it has given online retailers a serious leg up (as much as 10 percent) over their bricks-and-mortar competition. When Congress considered legislation to fix the problem back in the (original) dot com bubble, opponents argued that taxes would kill the baby in the cradle. When online retailers turned into Baby Huey—and Amazon is the poster child here—they argued that it would be a logistical burden to collect sales taxes in the thousands of different localities—never mind that the Barnes & Nobles and Targets of the world have already had to do that with their online sales. Now Amazon, having lost several battles with states over collecting taxes, and wanting to expand its physical presence to speed up its delivery, says it’s on board with a federal law allowing states.