The tracking required to determine where a sale is ultimately taxable is complicated. In such a situation, the NTA proposes that taxes be levied on the destination of the purchased goods. In other circumstances, such as on-line software purchases, where the destination cannot be determined, a complicated formula would allocate taxes to states in the same proportion as identifiable sales. While this approach seems workable for purchases in which the buyer and seller are in the United States, it is not problem free. The NTA proposal is directly at odds with the system supported by America's European trading partners, who have committed to a system that imposes taxes based on the seller's location.
Privacy protection is a second problem.
This intrusion is illegal in some states and might even be unconstitutional. Such a requirement also would not meet the fairness standard, since such information is not collected from traditional retail customers. Privacy issues raised by the NTA proposal open up the possibility that consumers in high tax states could use privacy claims to reduce or avoid taxes. Under current privacy laws, consumers must be notified that address information will be used for tax collection purposes, and sellers would have to give consumers the option of withholding the information. If a consumer asked that his or her address be withheld for tax reporting purposes due to privacy claims, the seller would either collect no tax or charge a default rate.