As online shoppers know, sales tax is usually not collected by the online merchant when the buyer is in another state. This is because of Supreme Court decisions holdings that the Constitution’s commerce clause prohibits “states from compelling out-of-state mail-order houses to collect use taxes on sales to in-state residents,” because the foreign merchant has insufficient contacts with the state. The State of North Carolina was not too happy about this. It threatened to compel Amazon to start collecting sales tax for purchases made by NC residents on the grounds that Amazon has a sufficient presence in North Carolina by virtue of paying commissions to NC residents via its “Associates” affiliate program. In response, Amazon has shut down its affiliates program in North Carolina, as of last Friday. Good for Amazon!
[Cross-posted at LRC]