Many Localities Are Unprepared to Collect Taxes on Online Purchases: Amazon.com and other E-Retailers Receive Tax Advantage Over Local Businesses

Source: Institute on Taxation and Economic Policy, March 2018

From the summary:
Online retailer Amazon.com made headlines last year when it began collecting every state-level sales tax on its direct sales. Savvy observers quickly noted that this change did not affect the company’s large and growing “marketplace” business, where it conducts sales in partnership with third-parties and rarely collects tax. But far fewer have noticed that even on its direct sales, Amazon is still not collecting some local-level taxes. This analysis reveals that in seven states (Alabama, Alaska, Idaho, Iowa, Mississippi, New Mexico, and Pennsylvania), Amazon is either not collecting local taxes or is charging a lower tax rate than local retailers. While this collection gap is troubling on its own, it also suggests that many localities are unprepared to reap the benefits of expanded sales tax collection authority that may soon be coming from the U.S. Supreme Court or Congress. Worse, this lack of preparedness extends beyond the seven states identified above and includes states such as Colorado and Illinois where Amazon collects local tax, but where e-retailers without in-state facilities may not be able to do so….