The Sales-Tax Free Model

By: Miles Pringle

January 2017


For Christmas this year my sister, who lives in Austin, came to Oklahoma City with her family.  We had a wonderful time, which included teaching one of my nieces how to play softball and playing with a remote-control car.  My sister flew, so she had to ship her assortment of presents to Oklahoma.  Thus, I ended up with several packages from Amazon on my porch, which got me wondering if Oklahoma received any sales tax for the packages my sister ordered via the internet while in Texas and shipped to Oklahoma.

Now, Amazon has warehouses all over the country, and allows retailers located around the world to sell their products through amazon.  Thus, determining the point of shipment for her orders is near impossible.  According to Amazon’s website, Amazon Prime, of which I believe my sister is a member, is subject to sales tax in the following jurisdictions: Alabama, Arizona, California, Colorado, District of Columbia, Florida (Communications Services Tax only), Kentucky, Iowa, Michigan, Nebraska, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Washington, West Virginia and Wisconsin.[i]

Notably absent from this list is Oklahoma.  The Oklahoma Legislature attempted to address this issue, in part, in May of 2016 by passing House Bill 2531.Despite their attempts, Amazon continues not to assess a sales tax for products shipped to Oklahoma.  The crux of the issue is that while “[o]nline retailers who maintain business operations in the state already are required to add the [sales tax], those without Oklahoma stores generally do not add the tax, leaving consumers on the honor system to pay it later.”[ii]  The bill is in accordance with federal caselaw, and according to Representative Scott Inman, “the fact of the matter is that solution resides in Washington.”[iii]

The caselaw behind Representative Inman’s statement includes Quill Corp. v. N.D., in which the Supreme Court concluded that North Dakota’s application of sales tax on an out-of-state mail order company constituted and “unconstitutional burden on interstate commerce.”[iv]  The Court reaffirmed its opinion and applied it to online retailers as recently as 2015, in Direct Mktg. Ass'n v. Brohl, stating “under our negative Commerce Clause precedents, Colorado may not require retailers who lack a physical presence in the State to collect these taxes on behalf of the Department.”   In Direct Mktg. Ass'n the Court, however, ruled in favor of Colorado’s law (requiring on-line retailers to report information to customers and the state tax authorities) and allowed the case to proceed.  The Court noted that compliance with voluntary laws “is relatively low, leading to a significant loss of tax revenue, especially as Internet retailers have increasingly displaced their brick-and-mortar kin.  In the decade before this suit was filed in 2010, e-commerce more than tripled.”[vi]

The Direct Mktg. Ass'n suit made its way back to the 10th Circuit in 2016, which opined that Colorado’s law was constitutional, stating that the “outcome of this case turns largely on the scope of Quill.  We conclude it applies narrowly to sales and use tax collection.”[vii]  The Supreme Court declined to review the 10th Circuit’s ruling in December.[viii]

Whether it takes a ruling from the Supreme Court or an act of Congress, the laws regarding internet interstate sales tax should change.  Internet retailers take advantage of the opportunity to market and sell products (and services) to individuals and businesses across the country, without paying any price for entering those markets (shipping not included).  It disadvantages companies who actually operate in localities and employ local citizens, like in Oklahoma.  Sales tax is a main source of revenues for localities, and the current state of affairs operates like the Wal-Mart effect on steroids.  At least when a Wal-Mart opens in your town, it pays sales tax and hires employees.  Brick-and-mortar stores will never be able to offer the same volume of goods as online giants, but having their prices additionally undercut by “voluntary” sales tax laws is anti-competitive.  


[i] Amazon, “About Sales Tax on Amazon Prime”, available at (last accessed January 5, 2017).

[ii] Green, Rick, “Internet tax bill goes to Oklahoma governor’s desk”, The Oklahoma, pub. May 12, 2016.

[iii] Green, Rick, “Oklahoma House passes bill to collect tax on Internet sales”, The Oklahoman, Pub. March 14, 2016.

[iv] 504 U.S. 298, 301, 112 S. Ct. 1904, 1907 (1992).

[v] Direct Mktg. Ass'n v. Brohl, 135 S. Ct. 1124, 1127 (2015).

[vi] Id.

[vii] Direct Mktg. Ass'n v. Brohl, 814 F.3d 1129, 1136 (10th Cir. 2016).

[viii] Brohl v. Direct Mktg. Ass'n, No. 16-458, 2016 U.S. LEXIS 7454, at *1 (Dec. 12, 2016).


©PRINGLE® 2017

This Article was originally published in Oklahoma County Bar Association’s Briefcase Vol. 50 No. 1 in January 2017.