[btilly]

The exact same way that internet companies do. :-)

As much as states don't want you to think about it, the Constitutional issues were settled back in the 1800s. If you do business with a company from another state, that is interstate commerce and only the Federal government can make laws about it. So, very importantly, your state government can't.

However if the company and customer exist in the state, then state law can apply to both. So companies have to track and apply state sales tax only for states where they have a physical presence.

After that it is all down to what it means for a company to exist in a state. For example if Amazon owns a subsidiary named A2Z Development which is doing software development in California for Amazon, does Amazon have a presence in California?

[8ytecoder]

>> After that it is all down to what it means for a company to exist in a state. For example if Amazon owns a subsidiary named A2Z Development which is doing software development in California for Amazon, does Amazon have a presence in California?

It's called having a nexus - even a single employee counts as having nexus. I'm not sure about subsidiaries though.

[btilly]

Several states have passed laws saying that affiliates in a state are enough to establish a nexus. Precedent varies by court about whether this is so. For example New York said yes, Illinois said no. No case has yet found its way to the Supreme Court.

I do not know of precedent involving subsidiaries. But the legal case for it would seem to me to be stronger than it is for affiliates. And even if the courts did rule otherwise, well, if the state really wants to go after a local subsidiary, surely they can make their life hard in SOME way...

According to California law AB153, affiliates count as a nexus. This did not get legislated. Amazon responded by cutting off all California affiliates after that was passed. Then the issue of subsidiaries was raised. After some negotiation, California did not go after subsidiaries like A2Z Development, and Amazon started collecting California state tax in 2012.

[vkou]

> As much as states don't want you to think about it, the Constitutional issues were settled back in the 1800s. If you do business with a company from another state, that is interstate commerce and only the Federal government can make laws about it. So, very importantly, your state government can't.

That's because this leads to incredibly absurd conclusions, such as Amazon 'not doing business' in a state, despite selling billions of dollars worth of merchandise to it. I don't understand how people can claim this to be the case, with a straight face.

In fact, I would daresay say that Amazon.com selling things to residents of Montana means that it has a presence in the state, for the purposes of that transaction, moreso then it does for having an Montana office that employs 8 people who code for AWS.

[kevin_thibedeau]

Sears Roebuck did the exact same thing when they were shipping everything by rail out of Chicago. Nobody out of state paid sales tax then either.