Sales Tax: When ‘Animal Farm’ Meets the Metaphysical World of the Internet

Should the internet be a tax-free zone like the duty-free shops in international airport terminals? Does it make sense to subject the internet to a different set of laws than any other space?

These questions are central to the proposed Marketplace Fairness Act, which would empower states to collect sales tax from online sellers. Ahead of Congress, some states have become innovative in how they interpret the concept of "nexus" — i.e., the connection between a business and the state that legitimizes tax collection. These states have enacted what's become known as the "Amazon Tax," which increases the exposure of online merchants to the same sales taxes paid by brick-and-mortar businesses. So far, 21 states have enacted an Amazon-type law, expanding their reach to online retailers.