In 1992, two years before Jeff Bezos incorporated Amazon, the Supreme Court struck down a North Dakota law that would have enabled the state to collect sales tax from mail-order office giant Quill Corporation. At the time, the New York Times wrote that the case arose from “fiscally starved states” and “a maddening loss of revenue.” For consumers, not paying sales tax “simply add[ed] to the appeal of catalogue shopping.” During the intervening two decades, catalogue shopping has moved online and now bricks-and-mortar giants like Wal-Mart and Target, which began collecting sales tax for online purchases in 2003, are joining booksellers in calling for sales tax fairness. Despite some victories for advocates in 2012—most notably in California, where Amazon began collecting sales tax in September, and in Massachusetts, where Gov. Deval Patrick signed a sales tax agreement with Amazon two weeks ago—state-by-state Internet fairness laws, or “Amazon laws,” only go so far.

Because the Supreme Court ruling requires sellers with a physical presence, or nexus, to collect sales tax, many bricks-and-mortar chains created separate online operations. As recently as this spring, Barnes & was still negotiating with New Mexico over how much sales tax it owes for the period from 1998 to 2005. When states began defining nexus as a store, a warehouse, or an affiliate, both Amazon and dropped affiliates. And in Illinois, a judge voided the state’s online sales tax and ruled that it violates the 1998 Internet Tax Freedom Act, which prevents states from taxing Internet access and imposing Internet-only taxes.

To further muddy the waters, Internet sales taxes don’t necessarily apply to digital content or even all physical books. Arizona, which will begin collecting online sales tax in February, will delay taxing e-books for five months. And while Amazon currently collects sales tax in eight states, taxes on Kindle books are based on the publisher’s tax reporting obligations and the taxability of digital books. Random House Digital charges sales tax in every state, while Hachette Digital does so in 24. As for college textbooks, 21 states have declared them exempt from sales tax, as long as certain conditions are met.

In another twist, the governor of Vermont signed an affiliate tax law in 2011 that can’t go into effect until 15 states pass similar measures. The state does require online businesses doing more than $100,000 annually in Vermont to notify consumers in the state that they have to pay use tax—a tax that many states have on their books—but that few consumers pay. South Carolina insists that Amazon provide similar notification for customers there, until it begins paying sales tax in 2016.

The fact that online retailers have dodged the tax through shedding affiliates or threatening to pull warehouses and fulfillment centers is further evidence for some, like David Didriksen, president of Willow Books & Cafe in Acton, Mass., and co-chair of the Massachusetts Main Street Fairness Coalition, that “it’s a strategic advantage not to charge tax. I am totally against sales tax. However, I fought for fairness in the application of the law. I applaud Governor Patrick. He stepped up. This is the best solution for now.” Didriksen, like many sales tax fairness advocates, would prefer the federal solution offered by the Marketplace Fairness Act, first introduced in 2011 by Senate Majority Whip Richard Durbin (D-Ill.) and senators Mike Enzi (R-Wyo.) and Lamar Alexander (R- Tenn.).

A National Approach

Relying on a state-by-state solution to Internet sales tax, said Richard Hershman, v-p of government relations for the National Association of College Stores, is “a hodgepodge of Band-Aids that won’t fix the problems for consumers and retailers.” Although members of NACS and the American Booksellers Association continue to actively work on the state level for sales tax fairness, ABA CEO Oren Teicher agreed that a national solution is preferable. “The American Booksellers Association and our members will continue to strongly support legislation pending in Congress to establish a national solution. We’ve always thought that was best,” he said.

Even though Hut Landon, executive director of the Northern California Independent Booksellers Association and of the San Francisco Locally Owned Merchants Alliance, worked for years to get his state to pass the Amazon tax, he still said, “We’d love to have a federal option. As a citizen and someone who cares about quality of life, I want to collect sales tax.” He pointed out that California didn’t just lose out on sales tax for decades, but that Amazon helped put Bay Area stores like Cody’s Books and Stacey’s Bookstores out of business, which has cost the state millions in tax revenue.

Ironically, while Amazon fought against legislation on the state level, it is an advocate for a federal solution. In August, Paul Misener, v-p of Amazon global public policy, testified before the U.S. Senate Commerce Committee in support of Marketplace Fairness. “Amazon has long supported an even-handed nationwide framework for state sales tax collection, and only Congress may create this framework. To this end, Amazon believes that Congress should authorize the states to require out-of-state sellers to collect the sales tax already owed,” he said.

One of the sticking points over Marketplace Fairness, which has bipartisan support, is fairness for small-volume sellers. Some want the threshold for collecting sales tax to be $500,000 in annual sales. Amazon’s Misener would prefer no exemption. He noted that according to research commissioned by Amazon, only 1% of online sellers sell more than $150,000 per year. “In other words,” he said, “the $500,000 threshold... would exempt well over 99% of online sellers.”

Some believe that Amazon’s turnaround on the sales tax issue has much to do with its latest attempt to offer next-day service via its Amazon lockers. The orange post office–style boxes line walls in RadioShack, 7-Eleven, Gristedes, Staples, and other drugstores and grocery stores. Participating cities in the U.S. include New York, San Francisco, Los Angeles, Seattle, and the Virginia suburbs of Washington, D.C. The strategy could constitute nexus in a growing number of states.

It seems unlikely that eBay—which began testing eBayNow, a same-day delivery service, in San Francisco and parts of New York City earlier this year—will join Amazon in advocating federal sales tax fairness. Along with e-commerce businesses like Facebook, it is a member of, a coalition dedicated to removing barriers to e-commerce, including Internet sales tax.

Time for Change

But change could be coming. As NCIBA’s Landon noted, “I’m convinced that in the last year and a half Amazon and sales tax avoidance have become much more part of the public conscience. More and more people are talking about shopping local.” A poll released by the International Council of Shopping Centers in the middle of last month certainly bears this out. Fifty-nine percent of those polled support the congressional effort to require online retailers to collect sales tax at point-of-purchase; 71% shop locally because 68 cents of every dollar stays in the community; and 82% support federal legislation because “common sense dictates that if you buy a product online you should pay the same sales tax as if you had bought the same product in a store.”

The 112th Congress will likely come to an end without passing the Marketplace Fairness Act. According to Christina Mulka, Durbin’s deputy communications director, “Senator Durbin is committed to seeing the Marketplace Fairness Act pass. He will continue to look for opportunities this Congress. But as we are nearing the end, he is also planning to reintroduce [the bill] next Congress with his colleagues Senator Enzi and Senator Alexander.” To date, 24 states have passed legislation conforming to the Streamlined Sales and Use Agreement to make it easier for online retailers to collect tax if the law is passed; another nine states have introduced legislation.

Despite the remaining details to be worked out, NACS’s Hershman predicted that “between the likely cuts in federal funding to states and the growth of e-commerce, the stars are in alignment for passage of the Marketplace Fairness Act in 2013.”