The United States is characterized by its decentralized system of government. States, counties, cities, towns, and smaller localities independently decide how to raise the revenue needed to fund the services they provide. Such a regionalized system presents significant compliance challenges for businesses seeking to establish a national presence. States containing over 15,000 taxing jurisdictions levy their own sales taxes, set the rates, and determine what will and will not be taxed. As a result, such businesses face a complex structure of sales and use taxes. These are constantly changing as state and local lawmakers look for ways to increase revenue to meet their growing obligations. The advent of e-commerce has revolutionized the retail landscape. A niche business can now generate sales nationally via their websites and web-based marketing strategies.

E-commerce business has made it relatively easy for customers to make purchases without paying sales tax. In addition, the payment of use taxes associated with most of these purchases is often overlooked by the purchaser.  Landmark cases brought against e-commerce giants, such as Amazon, have dramatically extended the reach of the state beyond its traditional borders. Initially, such a company was only required to collect sales tax in its home state. It is now getting much more difficult to avoid sales tax when shopping online. The broadening definition of physical presence has triggered an extended obligation to collect local sales tax (nexus). In addition, the huge growth of state online sales tax laws, known as “Amazon Laws”, often impose sales tax on retailers generating sales through in-state affiliates.