What is F-ITFA

The law that governs the e-commerce taxes is the Federal Internet Tax Freedom Act (F-ITFA) The Federal Internet Tax Freedom Act is a federal law that was first signed into law by President Bill Clinton on Oct. 21, 1998 as part of Public Law 105-277.  In 2007 President George W. Bush made the law permanent.

According to the F-ITFA state or political subdivision are prohibited from imposing taxes on Internet access or multiple or discriminatory taxes on electronic commerce It preserves state and local taxing authority otherwise permissible under the U.S. constitution or other federal law in effect on that date. Nothing in the law affects liability for taxes accrued or enforced before the date or litigation related to the taxes.

The Marketplace Fairness Act of 2015 gave states the right to compell out-of-state vendors to collect and remit taxes to the states for sales to residents in their respective states.

Each Member State under the Streamlined Sales and Use Tax Agreement (SSUTA) is authorized to require all sellers not qualifying for the small seller exception described in subsection (c) to collect and remit sales and use taxes with respect to remote sales sourced to that Member State.    

Which States Have Laws Requiring The Collection of Internet Sales Taxes

If a state has a sales tax law the taxes on out-of-state (Internet) purchases have to be colected and paid to the state.  The question is whether it is the buyer or the seller who is required to collect and pay the tax. 

Currently when a purchase is made from an out-of-state(online) vendor the buyer is required to pay the tax (called the use tax) or show proof that it was paid at the time of purchase. 

States are trying to require out-of-state(online) vendors  to collect and pay the tax to the state.

Hence, states have passed laws that sucribes to a common agreement providing for the collection of taxes on  out-of-state(online) transactions between an out-of-state vendor and a state resident.  This is often referred to as Nexus.

According to the NEXUS Agreemtnt Presence in the state can be  defined as:

-a warehouse in the state
-a store in the state
-an office in the state
-a sales representative in the state
-Affiliates
-Agents
-Employees
-other representation

The Internet sales tax rate is the same as the normal sales tax rate on the same items as if they were bouth in a bricks & mortar store.

These state laws only require out-of-state(online) vendors to collect taxes if they have more than a certain amount of annual sales [above $5,000 or $10,000] from residents in their respective states.  They were designed to target big online businesses to collect and remit taxes to the state.

States that currently have an Internet Sales Tax Law includes:

State Description
Alabama [Nexus] ADOR Announces Sales and Use Tax Guidance for Online Sellers.  The in-state business provides services to, or that inure to the benefit of, the out-of-state business related to developing, promoting, or maintaining the in-state market.
Arkansas Taxes will be collected if total annual sales to residents exceeds $10,000 if vendor has affiliates in the state.
Arizona(page 6) Taxes will be collected for sales to residents if vendor has affiliates in the state.  Arizona is a NEXUS state/
California Taxes will be collected if total annual affiliate sales to residents exceeds $10,000, and tangible personal property sales to purchasers in the state of over $500,000. 
Colorado Any business doing business in the state through affiliates or physical presence in the state are required to collect sales tax.
Connecticut
If the vendor has an agreement with a person located in Connecticut to pay for customer referrals obtained via a link on the Connecticut seller’s website (a click-through arrangement), and the out-of-state retailer’s cumulative gross receipts from these sales to Connecticut customers exceeds $2,000 during the preceding four quarterly periods.  [Chapter 219 Sales & Use Taxes)
Florida If a vendor have employees, agents, or independent contractors conducting sales or other business activities.
Georgia Section 48-8-2(8) of Georgia’s sales and use tax law was amended to state "Maintains or has within this state, indirectly or by a subsidiary, an office, distribution center, salesroom or sales office, warehouse, service enterprise, or any other place of business".  Georgia Department of Revenue Policy Bulletin SUT-2018-07.
Hawaii If the vendor has a place of delivery within Hawaii by the purchaser , or thru agents and have "Nexus".  “Nexus” means the activity carried on by a seller in Hawaii which is sufficiently connected with the seller’s ability to establish or maintain a market for its products in Hawaii.
Idaho The Tax Commission will implement a new law (House Bill 578) that requires out-of-state retailers to collect Idaho sales tax on their sales to Idaho customers when: The out-of-state seller has an agreement with an Idaho retailer to refer potential buyers to the out-of-state seller for a commission, and The total sales to the Idaho buyers exceeded $10,000 in the previous year. The law goes into effect on July 1, 2018.
Illinois Added to the fiscal year 2019 budget implementation bill is the requirement for online retailers to collect and remit the 6.25% sales tax on all transactions.  All businesses with over $100,000 of online sales in Illinois, or at least 200 discrete transactions, are required to collect the tax on all purchases.  The effective date for the implementation of this new rule was October 1, 2018.
Indiana Must collect online sales tax if online retailers with sales exceeding $100,000 or 200 transactions with Indiana consumers.
Iowa Collection responsibility is placed upon all interstate sellers who sell tangible personal
property or taxable services for use in Iowa, provided the seller maintains directly or by a subsidiary, an office, distribution house, sale house, warehouse, or other place of business or any representative operating within the state either permanently or temporarily. Definitions.
Kansas Must collect online taxes if Retailer has presence in the State.  The presumption that a retailer is doing business in Kansas also applies if any person (other than a common carrier acting in its capacity as such) who has sufficient nexus in Kansas to require the collection and remittance of sales and use taxes:
Kentucky Any retailer maintaining, occupying, or using, permanently or temporarily, directly or indirectly, or through a subsidiary or any other related entity, representative, or agent, by whatever name called, an office, place of distribution, sales or sample room or place, warehouse or storage place, or other place of business.
Louisiana Internet sales are treated the same as catalog sales for sales tax purposes. If the business has a presence in Louisiana or delivers into Louisiana in its own trucks, it should register for and charge Louisiana sales tax on the sales it makes to Louisiana customers.
Maine Must collect online sales tax if online retailers with sales exceeding $100,000 or 200 transactions with Michigan consumers.
Maryland Has an agent, canvasser, representative, salesman, or solicitor operating in the State for the purpose of delivering, selling, or taking orders for tangible personal property or a taxable service. [Nexus]
Massachusetts Must collect online sales tax if online retailers with sales exceeding $500,000 or 100 transactions with Michigan consumers.  The Department of Revenue’s existing regulation 830 CMR 64H.1.7 (Vendors Making Internet Sales), which took effect in October 2017, continues to apply and is not impacted by the Supreme Court’s decision.
Michigan  Must collect online sales tax if online retailers with sales exceeding $100,000 or 200 transactions with Michigan consumers.
Minnesota
Have entered into an agreement with a solicitor for the referral of Minnesota customers for a commission and your gross receipts over 12 months is at least $10,000.
Mississippi Remote sellers with annual Mississippi sales in excess of the $250,000 small seller exception should register for a Mississippi Use Tax Account and begin collecting tax no later than September 1, 2018. All online or remote sellers seeking to comply with these provisions should visit https://tap.ms.gov  to register with the Department.
Missouri Missouri is a NEXUS state. Online taxes must be collected and remitted if sales exceeds $10,000 in the preceeding months.
Nebraska
[Home]
Maintaining, occupying, or using permanently or temporarily, directly or indirectly, or through an agent, by whatever name called, an office, place of distribution, sales or sample room or place, warehouse or storage place or other place of business in this state.
Nevada If there is an agreement with a business or seller located in Nevada to pay for customer referrals obtained via a link on the Nevada seller’s website (a click-through arrangement), and the out-of-state retailer’s gross receipts from these directed sales to Nevada customers exceeds $10,000 during the preceding four calendar quarter. [FAQ]
New Jersey If there is an agreement with a business or seller located in New Jersey to pay for customer referrals obtained via a link on the New Jersey seller's website (a "click-through" arrangement), and the out-of-state seller’s gross receipts from these sales to New Jersey customers exceeds $10,000 during the preceding four calendar quarters.
New York Taxes will be collected if total annual sales to residents exceeds $10,000 if vendor has affiliates in the state.
North Carolina Taxes will be collected if total annual sales to residents exceeds $10,000 if vendor has affiliates in the state.
North Dakota Must collect online sales tax if online retailers with sales exceeding $100,000 or 200 transactions with North Dakota consumers. ND is a NEXUS state.
Ohio If an out-of-state seller has sufficient contact with the state (nexus), the seller is required to abide by Ohio's tax laws. Sellers who have nexus with Ohio are legally required to register, collect, and remit use tax, in the same way that the Ohio-based vendor collects and remits sales tax.
Oklahoma Any person who solicits business by employees, independent contractors, agents, or other representatives or by distribution of catalogs or other advertising matter in this state.
Rhode Island [Updated] Taxes will be collected if total annual sales to residents exceeds $5,000 if vendor has affiliates in the state.
South Carolina Online Retailers must collect and remit sales tax if they maintain an economic presence in the state beginning November 1, 2018. Must collect online sales tax if online retailers with South Carolina residents sales exceeds $100,000.
South Carolina If maintaining (temporarily or permanently) an office, warehouse, store, other place of business, or property of any kind in the state or having (temporarily or permanently) an agent, representative (including delivery personnel and independent contractors acting on behalf of the retailer), salesman, or employee operating within the state. SC Revenue Ruling #14-4 also includes affiliates.
Tennessee If there is an agreement with a business or seller located in Tennessee to pay for customer referrals obtained via a link on the Tennessee seller’s website (a click-through arrangement), and the out-of-state dealer’s gross receipts from these sales to Tennessee customers exceeds $10,000 during the preceding twelve months. [2015 Tennessee Code Title 67]
Texas Must collect online sales tax if online retailers with sales exceeding $100,000 or 200 transactions with Texas consumers. Texas is a NEXUS state.
Utah Must collect online sales tax if online retailers with sales exceeding $100,000 or 200 transactions with Utah consumers.
Vermont In 2011, the Vermont legislature passed a law that states a remote vendor will be presumed to have Vermont nexus for purposes of collecting sales tax if it has agreements with residents to refer customers that led to sales in excess of $10,000 in the previous year. 32 V.S.A. Sec. 9701(I).
Virginia As a representative, agent, or solicitor, of an out-of-state principal, solicits, receives and accepts orders from persons in this Commonwealth for future delivery.
Washington If entered into agreements with Washington residents and pay a commission or other consideration for referrals (such as linking on a website), and gross more than $10,000 in sales into Washington state during the prior calendar year under this type of agreement.
West Virginia [Update] Taxes will be collected for sales to residents if vendor has any agent (by whatever name called) in the state.
Wisconsin Any person who has an affiliate in Wisconsin, if the person is related to the affiliate and if the affiliate uses facilities or employees in Wisconsin to advertise, promote, or facilitate the establishment of or market for sales of items.
Wyoming Online retailers will have to start collecting online sales taxes starting February 1, 2019, subject to court approval.  Wyoming is a NEXUS state.  Must collect online sales tax if online retailers with sales exceeding $100,000 or 200 transactions with Wyoming consumers. Texas is a NEXUS state.
Internet Sales Tax News:

Collecting IL Online Sales Tax (Dec 2018)

New Ruling on Internet Tax Could Negatively Impact Your Smallbiz (Jul 2018)

Illinois Internet Sales Tax Overturned (28 Oct 2013)

Arkansas Passed New Internet Sales Tax Law (1 July 2011)

California Passed New Internet Sales Tax Law (1 July 2011)

Governor Pat Quinn signs Illinois Internet Retail Sales Tax Law (10 March 2011)

Illinois Internet Retail Sales Tax Law (7 March 2011)

Supreme Court Lets Colorado's "Amazon Tax" Law Stand