Internet Sales Tax

As a result of a Supreme Court ruling in the early 1990s, Internet retailers were largely 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. Of course, between 1992 and 2018, the number of people and businesses using the Internet for e-commerce transactions grew exponentially, and a large component of these transactions remained tax-free. Three major revenue sources for state and local governments are income taxes, property taxes and sales taxes. When Internet retailers were exempt, the amount of sales tax that a state or locality was able to collect was less than it could have been. To make up the shortfall, many state and local governments could have opted for higher real estate and other property taxes and fees.


Many states are considering trying to collect existing state and local taxes on internet sales through "click-through nexus legislation." Such legislation presumes that a nexus with the state is established when state residents click on a company's website to purchase an item. Then there is the “Amazon Law” in the state of New York, an approach that many states are also considering. That policy 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 Supreme Court has ruled in a case called South Dakota v. Wayfair Inc. that States can charge out-of-state retailers sales tax in some circumstances, even if those retailers do not have a store or warehouse in the State. That overturns its 1992 Quill decision and will enable States to impose sales taxes on internet purchases.

In Congress, 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.

Talking Points

  • 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.


Amicus curiae brief supporting South Dakota in Wayfair. 

Streamlined Sales Tax Governing Board

CRS 2002 Report for Congress on Internet Commerce and State Sales and Use Taxes 

Overview of Issues Related to the Internet Tax Freedom Act and of Proposals to extend or modify the Act


Aquiles Suarez
Senior Vice President for Government Affairs
703-904-7100, ext. 115