[joelhaus]

I'm familiar with the inter-state sales tax compliance functions at a number of firms and it is a tremendous burden. Not only most states, but numerous municipalities impose sales tax as well. As the article mentions, the problem is that Use tax[1] obligations are generally not paid by destination-state customers. This actually makes a great argument for why the federal government should collect a national sales tax, that is then distributed back to the states.

Regarding the legality of states attempts to collect sales tax on inter-state transactions, we can look to the commerce clause[2]. In the courts, one test that has been used is to ask whether a tax creates an unfair advantage for in-state commerce over inter-state commerce[3]. If you take into account the compliance demands created by an inter-state sales tax, I think the answer is almost always YES.

[1] http://en.wikipedia.org/wiki/Sales_and_use_tax

[2] http://en.wikipedia.org/wiki/Commerce_Clause

[3] http://law2.umkc.edu/faculty/projects/ftrials/conlaw/interst...