Contrary to popular belief, the internet is not a tax-free zone in the US. On-line transactions are meant to be taxed; the problem is that most customers don't know they're supposed to pay them and states lack an effective enforcement mechanism to collect them.
Federal legislation currently requires retailers to charge sales taxes if the buyer is located in the same state as the company. A number of states also require that retailers levy taxes at the places where their local bricks-and-mortar affiliates accept returns or exchanges for products purchased on-line.
Because most on-line merchants maintain physical stores in few places, they exempt customers from most states from paying taxes.
Under the deal, which was the result of negotiations between the retailers and state and local tax administrators, the participating companies will collect taxes from on-line shoppers across the US, and not just consumers living in states were the companies maintain physical stores or distribution centres, The Washington Post reports.
The names of the companies participating in the scheme have not been disclosed, because that would enable the states which rejected the deal - Arizona, California and South Carolina – to demand back taxes from these companies.
However, Wal-Mart, Marshall Fields, Target, Toys R Us and Mervyn's all posted new tax notices on their web sites in the past week, according to The Wall Street Journal.