I n recent years, there has been significant congressional interest in the states' ability to impose sales and use taxes on sales made over the Internet. Sales and use taxes are imposed on the consumer. However, states generally prefer that retailers collect and remit them, rather than relying on the consumer to pay the tax since consumer compliance is low. State laws requiring retailers to collect and remit these taxes are subject to federal law. First, the laws must comply with the U.S. Constitution, of which two provisions are particularly relevant—the dormant Commerce Clause and the Fourteenth Amendment's Due Process Clause. Second, such laws must comply with the Internet Tax Freedom Act (ITFA), which prohibits multiple or discriminatory taxes on electronic commerce. ITFA also prohibits state and local taxes on Internet access. The Supreme Court has ruled that, absent congressional action, the standard required under the dormant Commerce Clause is the seller's physical presence in the state, while due process requires only that the seller have directed purposeful contact at the state's residents. The Court concluded that these principles, along with the fact that the use tax collection obligations would burden interstate commerce due to the significant number of U.S. taxing jurisdictions and complexity of their requirements, meant that a state's authority to impose the obligations was limited to when the seller had a physical presence in the state. Since their enactment, questions have been raised about whether these laws are consistent with due process and the dormant Commerce Clause. Courts have considered the constitutionality of two statutes: New York's click-through nexus law and Colorado's notification law. In 2012, a federal district court struck down the state's notification law on Commerce Clause grounds. In March 2015, the Supreme Court held that the TIA does not apply to this suit, but left open the possibility that the suit might be barred by the comity doctrine, under which federal courts refrain from interfering with state fiscal operations "in all cases where the Federal rights of the persons could otherwise be preserved unimpaired." Notably, Justice Kennedy wrote a concurrence in which he raised the possibility that Quill was wrongly decided and should be reconsidered in light of technological advances and the development of the Internet. Congressional Authority to Act

Under its authority to regulate commerce, Congress has the power to authorize state action that would otherwise be an unconstitutional burden on interstate commerce, so long as it is consistent with other provisions in the Constitution. As such, Congress may permit state taxation without physical presence, but cannot change the standard required to satisfy due process. In order to do so, the state would either (1) have to be a member of the multistate Streamlined Sales and Use Tax Agreement (SSUTA) or (2) adopt the act's minimum simplification requirements for their sales and use tax laws. Internet Tax Freedom Act

The Internet Tax Freedom Act (ITFA), enacted in 1998, imposes a moratorium on (1) state and local governments imposing multiple or discriminatory taxes on electronic commerce and (2) taxes on Internet access. Originally set to expire in 2001, the moratorium has been extended several times, with the current continuing resolution extending it until December 11, 2015. Further, discriminatory taxes include those defined with reference to certain nexus requirements for remote sellers:
if the sole ability to access a site on a remote seller's out-of-state computer server is a factor in determining the seller's tax collection obligation, or if a provider of Internet access or online services is deemed to be the agent of a remote seller for determining tax collection obligations solely as a result of the display of a remote seller's information or content on the provider's out-of-state computer server or the processing of orders through that server. Internet Tax Freedom Act and State "Amazon Laws"

As discussed above (" State "Amazon Laws" and Their Constitutionality "), some states have recently enacted "click-through nexus statutes" that require a retailer to collect use taxes if its associates or affiliates have a physical presence in the state, even if the retailer does not. In the only case challenging such a law under the ITFA, the Illinois Supreme Court struck down its state's click-through nexus law in 2013 as being discriminatory.
In recent years, there has been significant congressional interest in the states' ability to impose sales and use taxes on sales made over the Internet. While these taxes are imposed on the consumer, states generally prefer that retailers collect and remit them, rather than relying on the consumer to pay the tax. State laws requiring retailers to collect sales and use taxes are subject to federal law. First, such laws must comply with the U.S. Constitution, of which two provisions are particularly relevant—the dormant Commerce Clause and the Fourteenth Amendment's Due Process Clause. Second, such laws must comply with the Internet Tax Freedom Act.
Both the dormant Commerce Clause and the Due Process Clause require that a retailer have a certain connection or "nexus" to the state before the state can require the collection of tax. The Supreme Court has held that the required nexus under the dormant Commerce Clause is the seller's "physical presence" in the state, while due process requires only that the seller have directed purposeful contact at state residents. Notably, Congress may change the "physical presence" standard under its power to regulate interstate commerce, so long as it is consistent with other constitutional provisions including due process. In the 114th Congress, legislation has been introduced (S. 698, Marketplace Fairness Act) that would allow a state to impose sales and use tax collection duties on remote sellers, regardless of physical presence, if the state (1) is a member of the multistate Streamlined Sales and Use Tax Agreement (SSUTA) or (2) sufficiently simplifies its sales and use tax laws and administration.
In addition to the Constitution, state sales and use tax collection laws must also comply with the federal Internet Tax Freedom Act (ITFA). It imposes a temporary moratorium on states imposing discriminatory or multiple taxes on electronic commerce. The moratorium also generally prohibits state taxes on Internet access. The continuing resolution (P.L. 114-53) passed on September 30, 2015, extends the act until December 11, 2015.
Meanwhile, some states have recently enacted laws, often called "Amazon laws" after the Internet retailer, in an attempt to capture uncollected taxes on Internet sales while still complying with the "physical presence" standard. States enacting these laws have used two basic approaches: (1) "click-through" nexus, which imposes the responsibility for collecting taxes on retailers who compensate state residents for placing links on their websites to the retailer's website and (2) requirements that remote sellers provide information about sales to the state and the customers.
State Amazon tax laws have raised issues under both the U.S. Constitution and the ITFA and have had a mixed reception in the courts. While the highest court in New York upheld that state's click-through nexus law against facial challenges on Commerce Clause and due process grounds, a federal district judge struck Colorado's notification law as violating the dormant Commerce Clause. However, the appeals court subsequently determined that federal courts do not have jurisdiction to hear the Colorado challenge due to the federal Tax Injunction Act. In March 2015, the U.S. Supreme Court held in Direct Marketing Association v. Brohl that the act did not apply to this suit, but left open the possibility that the suit might be barred by the comity doctrine. Notably, Justice Kennedy wrote a concurrence in which he suggested that Quill should be reconsidered in light of technological advances and the development of the Internet. With respect to the ITFA, the Illinois Supreme Court held in 2013 that the state's click-through nexus law violated the statute's moratorium on discriminatory taxes because it treated retailers engaged in online performance-based marketing differently than those with similar print and broadcast marketing arrangements.