Tired of waiting for Congress to clarify the issue, nearly two dozen states have enacted Internet sales tax laws or regulations in order to force a decisive court ruling on their legality, according to a report by Governing magazine.

States currently have little legal recourse to collect sales taxes on Internet purchases when the seller in question doesn't have a physical presence within a state's borders. State officials have long sought a federal law giving them that authority, but so far legislation doing just that hasn't gained traction in Congress.

South Dakota recently became the first state to enact legislation allowing it to collect sales taxes on out-of-state online retailers, the magazine reported. The e-commerce association NetChoice and American Catalog Mailers Association quickly filed a lawsuit in federal court to overturn the law, calling it an "unconstitutional expansion of state tax powers."

"South Dakota has imposed unconstitutional and unworkable burdens on remote sellers," said Steve DelBianco, executive director of NetChoice. "Left unchecked, this misguided tax law could set the course for enormous tax and administrative burdens on businesses across the country."

Twenty-one other states have also passed new laws and regulations to collect online sales taxes with the expectation that the issue will likely end up before the U.S. Supreme Court.

Associations are divided on the issue. Business groups that represent traditional brick-and-mortar retailers—such as the National Retail Federation and Retail Industry Leaders Association—support efforts expand sales tax laws because they view online retailers has having an unfair business advantage in not having to collect taxes.

However, NetChoice argues that making online retailers comply with a patchwork of state and local government tax laws would be a Herculean task. Large companies might manage, but small and startup retailers likely wouldn't have the resources to do the necessary bookkeeping, according to the association.

"It's more challenging for smaller retailers that don't have the computer systems and accounting staff to ensure compliance with 10,000 nationwide tax jurisdictions and 46 state tax auditors," the association said in a statement.

The Supreme Court has ruled on the issue of taxing out-of-state purchases before in Quill Group v. North Dakota, a 1992 decision involving the mail-order catalog industry. The court ruled states couldn't collect sales taxes if the seller didn't have a presence in the state. Supporters of online sales taxes argue the ruling is outdated given Internet sales now make up a large and growing part of the economy. http://bit.ly/1SIZj75

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