State and local governments are concerned that the expansion of e-commerce, which was estimated to reach approximately $3.9 trillion in 2012, is gradually eroding their tax base. This concern arises in part because the U.S. Supreme Court ruled out-of-state vendors are not required to collect sales taxes for states in which they (the vendors) do not have nexus. The member states hope that Congress could be persuaded to allow them to require out-of-state vendors to collect taxes from resident customers. Congress has a role in this issue because interstate commerce, in most cases, falls under the Commerce Clause of the Constitution. In the 113 th Congress, S. 743 , approved by the Senate on May 6, and S. 336 (Senator Enzi and others) and their House counterpart H.R. 684 (Representative Womack and others) would grant SSUTA member states and non-member states that meet less rigorous simplifications standards the authority to compel out-of-state vendors with greater than $1 million in remote sales to collect sales and use taxes. 3179 (Representative Womack) would have also granted states the authority to compel out-of-state vendors to collect use taxes provided selected simplification efforts were implemented. S. 1832 (Senator Enzi and others including Senator Durbin) would have granted SSUTA member states and non-member states that met less rigorous simplifications standards the authority to compel out-of-state vendors to collect sales and use taxes. Description of the SSUTA

The entity that drafted the original Streamline Sales and Use Tax Agreement (SSUTA), the Streamlined Sales and Use Tax Project (SSTP), was created in 2000 by 43 states and the District of Columbia. Total compensation for vendors in member states that require tax reporting by local jurisdiction is at least 0.75% of state and local sales and use tax collections. Legislation in the 112th Congress

In the 112 th Congress, S. 1452 and H.R. 2701 would have granted SSUTA member states the authority to compel out-of-state vendors in member states to collect sales and use taxes. Under S. 1452 , Congress would have granted authority to states to compel out-of-state vendors to collect sales taxes, on the condition that 10 states comprising at least 20% of the total population of all states imposing a sales tax have implemented the SSUTA. 3179 would have authorized states to compel out-of-state vendors to collect sales and use taxes if the following requirements were satisfied:
the state creates a remote seller sales and use tax return and requires filing no more frequently than in-state vendors; the state maintains a uniform tax base across the state; and the state uses one of three structures for remote sales tax collection: (1) a single state and local "blended" rate, (2) a single maximum state rate exclusive of any additional local rates, or (3) the destination rate which would be the actual rate of the customer's jurisdiction. Like H.R. Several legal challenges to these so-called Amazon laws have been presented; a thorough legal analysis of these challenges extends beyond the scope of this report. "New e-commerce" is the lost revenue from states not collecting the use tax on remote Internet transactions.
The United States Bureau of the Census estimated that $4.1 trillion worth of retail and wholesale transactions were conducted over the Internet in 2010. That amount was 16.1% of all U.S. shipments and sales in that year. Other estimates, based on different data, projected the 2012 so-called e-commerce volume at approximately $3.9 trillion. The volume, roughly $4 trillion, of e-commerce is expected to increase, and state and local governments are concerned because collection of sales taxes on these transactions is difficult to enforce.
Under current law, states cannot reach beyond their borders and compel out-of-state Internet vendors (those without nexus in the buyer's state) to collect the use tax owed by state residents and businesses. The Supreme Court ruled in 1967 that requiring remote vendors to collect the use tax would pose an undue burden on interstate commerce. Estimates put this lost state tax revenue at approximately $11.4 billion in 2012.
Congress is involved because interstate commerce typically falls under the Commerce Clause of the Constitution. Opponents of remote vendor sales and use tax collection cite the complexity of the myriad state and local sales tax systems and the difficulty vendors would have in collecting and remitting use taxes. Proponents would like Congress to change the law and allow states to require out-of-state vendors without nexus to collect state use taxes. These proponents acknowledge that simplification and harmonization of state tax systems are likely prerequisites for Congress to consider approval of increased collection authority for states.
A number of states have been working together to harmonize sales tax collection and have created the Streamlined Sales and Use Tax Agreement (SSUTA). The SSUTA member states hope that Congress can be persuaded to allow them to require out-of-state vendors to collect taxes from customers in SSUTA member states.
In the 112th Congress, S. 1452 and H.R. 2701 would have granted SSUTA member states the authority to compel out-of-state vendors in other member states to collect sales and use taxes. H.R. 3179 would have also granted states the authority to compel out-of-state vendors to collect use taxes provided selected simplification efforts were implemented. S. 1832 would have granted SSUTA member states and non-member states that met less rigorous simplifications standards the authority to compel out-of-state vendors to collect sales and use taxes. For a constitutional analysis of the legislation, see CRS Report R42629, "Amazon Laws" and Taxation of Internet Sales: Constitutional Analysis, by [author name scrubbed] and [author name scrubbed].
In the 113th Congress, S. 743, which was approved in the Senate on May 6; S. 336; and their House counterpart, H.R. 684, would grant SSUTA member states and non-member states that meet less rigorous simplifications standards the authority to compel out-of-state vendors with greater than $1 million in remote sales to collect sales and use taxes.
A related issue is the "Internet Tax Moratorium." The relatively narrow moratorium prohibits new taxes on Internet access services and multiple or discriminatory taxes on Internet commerce. Congress has extended the "Moratorium" twice. The most recent extension expires November 1, 2014. An analysis of the Internet tax moratorium is beyond the scope of this report.
This report will be updated as legislative events warrant.