Online Taxation Post Wayfair

47 Pages Posted: 6 Apr 2021

See all articles by Rifat Azam

Rifat Azam

Harry Radzyner School of Law, Interdisciplinary Center Herzliya

Date Written: April 5, 2021


The United States Supreme Court saved the states’ sales tax base in the landmark case of South Dakota v. Wayfair in 2018. This revolutionary decision ended the long ban on states imposing sales tax collection duties on out-of-state retailers without a physical presence in the state, as established in Bellas Hess v. Department of Revenue of Illinois in 1967 and Quill Corp. v. North Dakota in 1992. Wayfair now allows states to impose sales taxation on out-of-state retailers in the era of digitalization. In this article, I provide valuable guidelines and suggestions to aid states on this critical journey toward taxing remote online transactions fairly and efficiently.

Specifically, this article strongly supports the state-by-state approach to taxing remote vendors. I emphasize that the first step for each state is to make appropriate policy decisions that fit the interests of that state and to structure its legal frameworks accordingly. At the same time, a multistate layer of harmonization, coordination, and cooperation is essential to the long-term success of online taxation. Therefore, this article argues that states should develop and improve the current framework of the Streamlined Sales and Use Tax Agreement by implementing insights from the European Union’s value-added tax system, which is a result of far greater experience taxing online transactions.

Toward that end, this article contributes significant proposals, including the proposal to allow vendors to account for the sales tax in one state, the state of registration, and the proposal to establish a multistate clearinghouse for handling the balances between the states efficiently. This article also contains proposals to increase the use of tax compliance technologies, especially cloud computing, block-chain, and big data. These technologies automate the process of calculating and collecting sales tax in the most efficient manner. Next, this article suggests facilitating tax data sharing and tax collection through payment intermediaries, entities which already have the data and stand at the critical juncture of online transactions. Finally, this article recommends that Congress participate in the states’ efforts to tax online transactions by applying these proposals to international transactions. As the digital transformation of the economy accelerates, each one of these proposals and measures would enhance sales taxation in the era of e-commerce and digitalization post Wayfair.

Keywords: online taxation, Sales Tax, States Taxation, Online Sales Tax, Wayfair, Congress, Supreme Court, digital economy, international taxation, international trade, Federal Government, New technologies, physical present, economic present, virtual present, nexus

Suggested Citation

Azam, Rifat, Online Taxation Post Wayfair (April 5, 2021). New Mexico Law Review, Vol. 51, Available at SSRN:

Rifat Azam (Contact Author)

Harry Radzyner School of Law, Interdisciplinary Center Herzliya ( email )

P.O. Box 167
Herzliya, 46150
972-9-9527948 (Phone)


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