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One of the major difficulties encountered while trying to collect sales taxes over the internet is that sales tax rates vary widely from one state to the other. Furthermore, even within one particular state, local jurisdictions have the mandate to impose additional sales taxes within a certain range of permissible rates. To further complicate the problem at hand, states and sometimes local jurisdictions, have varied definitions of what is and what is not subject to their sales taxes. Secondly, the logistics of ensuring that every online retailer determines the applicable sales tax rates and tax classifications for every local jurisdiction of every state is quite high and can never be achieved with efficiency.

Due to this difficulty, The Supreme Court requires that state sellers should have a certain minimal association with a state to ensure that the state constitutionally imposes a collection obligation upon that vendor's sales (Baudier, 2006). Another problem encountered while trying to collect sales taxes over the internet is loss of revenue by the state. Some commodities simply go untaxed and these results into increased taxation in some other areas to make up for that which is lost. Collection of taxes over the internet does not guarantee equal protection under the law. The reason for this is that while those customers who buy certain commodities from their local retail stores must pay sales taxes, those that opt to buy the same commodities from an online retailer may in some cases fail to pay sales taxes (Walt, 2008).

Online shopping can be a way to find bargains while steering clear of crowds and sales taxes. But those tax breaks are beginning to erode as governments are increasingly committing themselves to fill the gaps due to tax losses by collecting taxes on Internet sales (Metz, 2009). The number of people resorting to internet shopping has also increased tremendously thereby having a negative impact on local retail outlets. The advantage of this is that it might force states to keep sales taxes low so that local merchants can compete (Bardes, Shelly & Schmidt, 2009).

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