Current law requires online retailers which have a physical presence in the states to collect online sales tax.
Online sales tax by the seller
If an online retailer has a physical presence in a particular state, that can be for example a store, or a office, or a warehouse, then the online retailer must collect online sales tax from online customers in that state.
If a business does not have a physical presence in a state, it is not required to collect online sales tax for sales into that state.
This rule is derived from a 1992 Supreme Court decision which held that mail-order merchants did not need to collect sales taxes for sales into states where they did not have a physical presence.
Online sales tax by the customer
In case the online retailer does not collect the online sales tax, the consumer is obligated to pay the online sales tax. The consumer should do so at the end of the year when they file taxes. The problem is that consumers rarely do report their online purchases. And so the lawmakers are trying to move the burden of the online sales tax collection on to the online seller.
Collecting the online sales tax is a problem for many sellers. Amazon first began challenging the law's interpretation and 2008.
If a business does not have a physical presence in a state, it is not required to collect