Internet Sales Tax

As a result of a Supreme Court ruling in the early 1990s, Internet retailers have largely been exempted from collecting state and local sales taxes on their sales transactions because these tax laws were seen as overly complex and placing too heavy a burden on interstate commerce, unless the retailer had a physical presence in the state. Since that time, the number of people and businesses using the Internet for e-commerce transactions has grown exponentially, and a large component of these transactions remain tax-free. Three major revenue sources for state and local governments are income taxes, property taxes and sales taxes. Because of the current treatment of Internet retailers, the amount of sales tax that a state or locality is able to collect will be less than otherwise provided. The deteriorating fiscal condition of many state and local governments could lead them to opt for higher real estate and other property taxes and fees to make up for this lost revenue.


Many states are considering the collection of existing state and local taxes for internet sales through "click-through nexus legislation." "Click-through nexus" legislation presumes that a nexus with the state is established when state residents click on a company's website to purchase an item. There is also New York's" Amazon law" approach that many states are also considering, which establishes a presumption of a state nexus based on out-of-state sellers who compensate state residents (i.e. associates or contractors) for internet sales. These legislative proposals are intended to collect lost revenues already owed.

A majority of states have simplified their sales tax systems through the Streamlined Sales and Use Tax Agreement (SSUTA). The SSUTA provides a uniform system to administer sales tax collection within the states, thereby simplifying the collection of sales taxes by internet retailers and lessening any burden on interstate commerce.


NAIOP opposes creating any new taxes on the Internet, including access taxes or discriminatory taxes, but we do support the collection of existing sales and use taxes already owed to state and local governments. Without a collection mechanism that requires the vendors to collect the taxes, the states will continue to lose billions of dollars each year.


The "Main Street Fairness Act" would authorize states that have signed on to the SSUTA to require internet retailers to collect sales taxes. The Senate passed the bill in 2015, but the House has failed to bring a companion bill to the floor for a vote.


  • This is not a new tax. This will allow the collection of existing state and local taxes that are already owed under current law.
  • This is an issue of fairness. "Brick and Mortar" retailers are required to collect taxes. These are the businesses that pay employees and support the community, yet their Internet competition is not required to collect the taxes. All businesses should compete on a level playing field.
  • According to the U.S. Census Bureau, 33 percent of state revenues come from sales taxes.
  • If states and localities continue to lose sales tax revenue, they will have to consider ways to offset that revenue loss, and property taxes will be one of those possible sources.