Jonathan Barsade

Owning and running your own company can be tremendously exciting, especially when you start to generate business in new markets and regions. When your business strategy is working like a charm, and customers from other states are beating a path to your door, it’s important to remember administrative obligations that can cause major problems and…

Should the internet be a tax-free zone like the duty-free shops in international airport terminals? Does it make sense to subject the internet to a different set of laws than any other space? These questions are central to the proposed Marketplace Fairness Act, which would empower states to collect sales tax from online sellers.

The question of taxation of online sales stems back to 1992, nearly a decade before e-commerce really began to take off, when the U.S. Supreme Court ruled that retailers didn't have to collect and remit local sales taxes unless they have a substantial connection ("nexus"), such as a physical presence, to the state where the customer lives. Where there was no nexus and sellers didn't collect the tax, the Court ruling left it up to customers to pay the taxes owed in the form of "use" taxes, but most consumers don't understand that obligation and very few bother to comply. This created a loophole for the upcoming world of e-commerce.