Distance Selling Tax: First Observations on the Effects of Expanding State Authority

What the GAO found

In its decision of June 2018, South Dakota vs. Wayfair, the Supreme Court ruled that states can require out-of-state businesses (commonly known as remote sellers) to collect and remit sales taxes even when there is no physical presence, such as an in-state store or warehouse. Next Wayfair, states moved quickly to put in place new legal requirements for distance sellers, which often differed from state to state. As of June 2021, all 45 states with statewide sales tax and the District of Columbia had adopted requirements governing the collection of sales tax by distance sellers based on a economic rather than physical presence (such as a number of in-state sales) . All but one had also passed requirements shifting primary tax collection obligations from sellers in an online marketplace to business facilitating the sale, such as Amazon, eBay and Etsy. These requirements vary in many ways, including effective dates, exemptions for small businesses below certain thresholds, and how those thresholds are calculated.

State tax agencies that responded to the GAO survey in 2022 attributed some sales tax revenue increases to distance sales as a result of the Wayfair decision. For example, 33 states provided data on 2021 collections from distance sales, totaling approximately $23.1 billion. In addition, 20 states provided data on the share attributable to in-market sales, totaling approximately $9.5 billion (approximately 41% of total collections from distance sales reported this period).

2018-2021 State Remote Sales Tax Revenue Collections


Revenue from all distance sales

(in millions)

Number of Reporting States

Revenue from distance sales via marketplaces (in millions)

Number of Reporting States





















Source: GAO survey of the 45 states with a statewide sales tax and the District of Columbia. | GAO-22-106016

Note: This table combines the calendar year and fiscal year formats provided by the states. Some states provided data on market collections only, which may underestimate total collections. Marketplaces include companies such as Amazon, eBay, and Etsy that facilitate sales on behalf of third-party sellers.

In November 2017, the GAO identified the costs associated with collecting multistate sales tax: software costs, audit and assessment costs, and costs associated with research and liability. The GAO has confirmed in its ongoing work that distance sellers incur costs in these categories as they take steps to comply with the new distance sales tax requirement. s. Among other things, companies incurred costs to establish software for expanding multi-state tax collection and audit and assessment costs associated with increased exposure to more tax jurisdictions. Businesses also incurred costs to keep up to date with legal requirements in multiple jurisdictions, but were still exposed to liability risks, including liability for past sales. For example, many states’ remote sales tax requirements went into effect approximately 3 months after Wayfair. However, some companies were not able to comply with these requirements until well after the effective dates, thus exposing them to liability for sales made after these dates.

Why GAO Did This Study

Sales tax is a major source of revenue for the 45 states with a statewide sales tax, averaging about one-third of total state tax revenue. Over the past quarter century, electronic commerce (e-commerce) sales have grown rapidly. However, until recently, states could not require e-commerce and other businesses operating out of state to collect taxes on sales to residents of their state unless the business had a presence. physics in the state.

The GAO was asked to testify about how states and companies have been impacted by the Wayfair decision. This statement summarizes GAO’s findings from a November 2017 report (GAO-18-114) and initial observations of ongoing work examining (1) the current landscape of distance sales tax requirements, (2) how state revenues have been affected by these requirements, and (3) what kinds of costs companies have incurred in complying with the requirements.

For the portion of this statement based on work in progress, the GAO administered a survey to revenue agencies in the 45 states with statewide sales tax and the District of Columbia. Forty-three states and the District of Columbia responded, for a 95% response rate. GAO also interviewed several organizations representing states and businesses, as well as companies engaged in e-commerce and multistate taxation, selected to represent a wide range of perspectives.

For more information, contact James R. McTigue, Jr. at (202) 512-6806 or [email protected]

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