American Independent Business Alliance

Sources on State Sales Tax and Reform of Internet Exemption

Sales taxes on retail purchases are widely charged in 45 U.S. states,* but not all businesses are treated equally. Businesses that sell via “brick and mortar” storefronts are forced by state governments to collect the tax on behalf of the states, but remote retailers lacking in-state facilities (online and catalog merchants) escape such responsibility (due to federal restrictions on states), effectively discounting their prices. This penalizes storefront businesses with a 4-11 percent handicap, creating a huge deterrent to patronizing local businesses (both independent and chain) and prevents genuine market competition.

The American Independent Business Alliance supports national reform to eliminate this government handicap on storefront businesses. * Alaska, Delaware, Montana, New Hampshire, and Oregon do not levy statewide sales taxes.

Information Sources



Legal Documents and Court Rulings


How Did State Sales Taxes Start?

According to the 1902 census, state governments generated 45 percent of revenues from property taxes while the figure for local governments raised 78 percent.1

Changing economic conditions drove states to diversify revenue sources and the stock market crash of 1929, with accompanying devaluation of property, led Kentucky and Mississippi to enact the first broad-based general sale taxes in 1930.2

New York City imposed the first local sales tax in 1934. By 1962, 12 states granted local governments the power to impose sales taxes. Today, more than half of all municipalities receive some revenue from sales tax, though often only as a share of state taxes.

In 1969, Vermont became the 45 state to enact a sales tax, leaving Alaska, Delaware, Montana, New Hampshire, and Oregon as the only states not imposing them. Some local entities collect some sales taxes within those states.

1. Michael A. Pagano, dean of the College of Urban Planning and Public Affairs at the U. of Illinois at Chicago

2. Sales tax on specific items was common throughout U.S history (and may date back as far as 2000 BC in Egypt). Such item-specific taxes proliferated during the U.S. Civil War, though many were terminated after the war’s conclusion. 

For more on issues surrounding of Corporation in this realm, see Amazon’s Physical Presence (Nexus) in U.S. States and the Sales Tax Battle.

Related Articles

Our All About Amazon library has much more on that corporation’s role in this issue


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