And Internet retailers are likely to resist efforts to make them sales-tax collectors for every state. The effect of the Quill Corp. decision on taxing electronic commerce remains to be seen. The Multistate Tax Commission, an association of state tax administrators, has been considering the issue in an attempt to come up with an equitable solution. It has proposed that perhaps the presence of a computer server where a company's Internet Web site is maintained could constitute the physical presence necessary to give the state where such a server is located jurisdiction over the company. With mail-order sales, at least the retailer actively mailed his catalog into the state to solicit the order from the customer.
Internet retailers are much more passive, as customers search and find their online locations.
If this is to be the test, it seems likely that after a brief burst of revenue to the states, it will all dry up again as retailers move their Web sites to Internet providers with servers in states with no sales tax. The arguments for state taxation do not appear to be well-founded, but given the money that is on the line and the need for new sources of revenue by states, it will not be surprising to see states at least try to take a piece of the pie. Another potential frontier of attack for states may be the increased enforcement of their state use taxes on residents. The use tax covers goods bought out of state, for use within the state, in order to prevent state residents from evading the sales tax by buying goods in other states. As home shopping becomes more global over the Internet, states may turn to more strict enforcement of their use taxes as a source of revenue.