Internet Tax Glossary

DISCRIMINATORY TAX, as it applies to e-commerce in the Internet Tax Freedom Act: Any tax imposed by a state or political subdivision thereof on electronic commerce that:

  1. is not generally imposed and legally collectible on transactions involving similar property, goods, services, or information accomplished through other means,

  2. is not generally imposed and legally collectible at the same rate unless the rate is lower as part of a phase-out of the tax during not more than a five-year period. For example, a state cannot charge an 8% sales tax on goods purchased in a store, and charge more than that — 10%, for example — on goods purchased online, or less than that — 4%, for example — on goods bought via catalog.

MULTIPLE TAX: A tax imposed by one state or political subdivision thereof on an e-commerce transaction that is also subject to another tax imposed by another state or political subdivision thereof, whether or not at the same rate. In other words, a single e-commerce purchase cannot be taxed by more than one state. For example, a purchaser in Connecticut buying something online from California cannot be charged a sales tax by both states.

REMOTE SALES TAX: Sales tax collected by merchants that have sold products to purchasers not in a state in which the merchant has nexus. Merchants would be required to collect and remit the sales tax on that. Currently, the U.S. Supreme Court’s 1992 decision Quill Corp. v. North Dakota bars this practice.