After New York’s Supreme Court ruled last year that online retailers are required to collect sales tax on orders they receive through affiliate Web sites based in the state, it was always pretty much a certainty that other states would pile on with their own versions of the “Amazon tax” (see my blog here). But I have to admit I’ve been a bit taken aback by how fast that’s happening this year. No fewer than five states — Virginia, New Mexico, Mississippi, Vermont, and Colorado — have jumped on the bandwagon in the past few weeks.

The hallowed notion of a tax-free Internet is also taking some flak in Congress, BNA reports today. The House is considering a bill to strengthen the “physical presence” standard and thereby keep states’ hands off of a company’s sales unless it has employees or tangible property within the state’s borders for 15 days or more per year. But in testimony to a judiciary subcommittee, Utah State Tax Commissioner R. Bruce Johnson was having none of it. The 21st-century economy is “electronic and borderless,” he insisted, and the physical presence standard is “not appropriate in the new millennium for either sales taxes or income taxes.”

“Electronic and borderless” the economy may be (or at least some of it — still less than 10 percent of retail is online). But sales taxes are still firmly stuck in the pre-Internet age. A reminder to Commissioner Johnson (though he shouldn’t need it): There are more than 8,000 tax jurisdictions in the United States. Sales tax rates are constantly changing, on average around 900 times per year. The taxability of products varies across jurisdictions. The compliance burden is huge.

Yes, of course, there are software tools and outsourcing services that can handle the task, but they come with a price tag that puts them out of reach of many smaller businesses. Not every Internet retailer is an Amazon. ###