Taxation of Internet Sales-Level 1

I was at a technology executive breakfast this morning.  As usual, I was the only sales tax person there which can make striking up a interesting discussion with the CFO or CEO of a technology business a bit challenging.  Out of curiosity, I was asked what TaxConnex is and how we work with technology companies.  To keep matters moving or just to be polite, I was then asked "when will states start taxing Internet sales?"  I was taken back a bit, but then I stated that states have always been able to tax Internet sales just as they have always had the ability to tax mail order catalog sales.  He then replies " I thought the seller had to have a physical presence before the item was taxed?"  At that point, I knew where the confusion was.  This person, as well as 90% of other people, are confusing the taxation of the property purchased over the internet with the party who has the responsibility for collecting or paying the tax.  These are totally separate and independent issues.  The taxation of the property has nothing to do with the ability or requirement of the seller to collect the tax. 

That's when I started talking about "use" tax and how each purchaser has the requirement to pay the use tax to the state if we buy something on the net that isn't taxed by the seller.  He looked astonished and asked when that rule was imposed.  I said "early 60s".  He then proceeded to tell me about all the high-tech Stern and TV systems he had purchased from various on-line retailers who didn't charge him tax. To prod him a bit, I asked if he wanted me to send him a use tax return?  He smiled, and politely declined!! 

Over the years, I've had this discussion countless times.  Mostly with businesses but often with individuals.  For the sake of repetition, the taxation of the property or service purchased on the net is independent from the responsibility of who has to pay the tax.  Given the shortage of cash by the states I think it is just a matter of time before there is some broad based requirement for remote retailers to collect and remit sales tax on sales regardless of the actual contact they have with a state.  I don't know what that will look like or whether that will have any connection with the SSTP initiative underway, but I just sense some movement will take hold within the next few years.