Alternatively, the preferred solution by most states and retailers is to simply end the subsidy for online retailers and require them to collect sales tax.

Before computers and databases, it was a valid excuse to say that merely calculating sales tax was burdensome for a retailer. Today, calculating and collecting sales tax is trivial--there are dozen of SaaS providers for online retailers, including Amazon itself.

It is not a subsidy - it is part of the Constitution... you cannot put a tax on items that are coming from another state.

As well, it wouldn't matter, because the price differences on most items would still be a lot more than the sales tax. No one would go online if the only difference was 6% or 8% sales tax. We are talking 20-30% differences in some cases.

You most certainly can put a tax on items coming from another state. The Constitution merely prohibits a discriminatory tax on items coming from other states (i.e., a tax that is not equal to the same items coming from sources in your state).

I would be interested to hear your take on Quill Corp. v North Dakota then... unless I am mistaken, even other states, such as Connectibut, agree with the main thrust of my post ... http://www.ct.gov/drs/cwp/view.asp?a=1514&q=268516 - that they are not allowed to tax items delivered by common carrier, coming from another state.

What you may be talking about is the use (I call it property tax) tax that some states wish to levy on property that comes into the state and remains in the state. I agree, there would be no difference between items regardless of their origin in such a case.

Quill does not hold that you cannot tax items sold from other states and brought into the taxing state. It merely hold that the selling entity must have sufficient nexus to X state to justify the imposition of a sales tax.

However, fundamental to Quill was the burden that calculating a sales tax would impose on the retailer. In the times of Quill, incidental sales (in the case, less than a dozen over several years) to customers in North Dakota were not enough to justify the burden of imposing a sales tax; it would have cost Quill more to figure out the sales tax owed than Quill would make from the sale.

But technology has changed. The concerns raised in Quill are non-existent today; it is trivial and dirt cheap to calculate and collect a sales tax for all taxing jurisdictions in the U.S.

Amazon knows this; that is why it has always backed down when states threaten to pursue this issue in court (i.e., NY, Cali, and Texas). Indeed, Amazon now offers a sales tax calculation service to smaller etailers.

Note that most legal commentators agree that Quill could easily (and probably would) have gone the other way if the catalog company in the case had sold to more than a handful of customers in North Dakota.

Amazon has in fact reviewed this idea in recent years, but not acted on it.