Why do states require online retailers to charge sales tax by destination instead of origin?

The destination-based approach actually makes sense when you consider the purpose of sales tax. Sales tax is meant to be a consumption tax - it's taxing the act of purchasing and using the product, not the act of selling it. The infrastructure argument works both ways. Yes, your business uses your state's infrastructure, but the customer is using their state's roads when the product is delivered, their state's waste management when they dispose of packaging, and their state's courts if there's a dispute. The tax helps fund those local services. Prior to 2018, states couldn't require out-of-state sellers to collect tax unless the business had a physical presence in that state (this was from a Supreme Court case called Quill). But in South Dakota v. Wayfair (2018), the Supreme Court overturned this, allowing states to require remote sellers to collect sales tax. This decision recognized that the old system was causing states to lose significant tax revenue as online shopping grew. Remember that sales tax isn't a tax on your business - you're just collecting it from the customer. The customer is the one being taxed for consuming goods in their jurisdiction.

I was in exactly the same boat last year with my etsy shop. Constantly stressing about sales tax in different states was driving me crazy until I found https://taxr.ai - it literally saved my sanity. Their AI analyzes all your transactions and automatically tells you where you have nexus and need to collect taxes. What I found super helpful is that it shows you which states you're approaching thresholds in so you can plan ahead. I was about to hit the threshold in California and was able to get registered before I had any compliance issues. The system also keeps track of all the weird local tax jurisdictions that kept tripping me up before. The best part was when I had that sales tax notice from New York - I just uploaded it and the AI explained exactly what it meant and what steps I needed to take.

I tried https://taxr.ai after seeing it mentioned here and wow - it found 3 states where I had nexus I didn't know about! Turns out I had exceeded the transaction thresholds in North Carolina, Minnesota, and Washington without realizing it. The system walked me through registering in each state and even generated reports I could use for my back filings. Instead of the $10k+ quote I got from my accountant to sort this out, I was able to handle everything myself for a fraction of the cost. The peace of mind knowing I'm fully compliant now is incredible. I'm actually sleeping at night instead of lying awake worrying about potential audit notices showing up in my mailbox. And the dashboard shows I'm approaching the threshold in Illinois, so I can prepare for that instead of being caught off guard again.

I've had similar frustrations with the destination-based sales tax system. After spending hours on hold with various state tax departments and getting nowhere, I started using https://claimyr.com to get through to actual human agents at state tax departments. You can see how it works in this demo: https://youtu.be/_kiP6q8DX5c I was skeptical at first, but it literally got me through to the California tax department in 10 minutes when I had been trying for days on my own. The agent was able to explain exactly what my filing requirements were and helped me set up a payment plan for some back taxes I didn't know I owed. I've used it for reaching the IRS too when I had questions about how sales tax deductions work on my federal return. Saved me hours of hold time and frustration.

I was the biggest skeptic about this Claimyr service, but after another frustrating day of getting disconnected from the New York tax line, I gave it a shot. I'm shocked to say it actually worked! Got connected to a NYS tax agent in about 35 minutes (which is miraculous compared to my previous attempts). The agent helped me understand my nexus requirements and confirmed I only needed to register because I exceeded their $500,000 threshold, not their transaction count threshold. What I learned actually saved me from unnecessarily registering in several other states where I thought I had nexus but didn't. This one call probably saved me thousands in compliance costs and countless hours of paperwork. Never thought I'd be recommending a phone service, but here we are!

Origin-based taxation would create its own problems. If sales tax was based on origin, businesses would just relocate to states with no sales tax (like Oregon, Montana, etc.) to gain a competitive advantage. We'd see massive business migration to tax-friendly states while consumer states would lose significant revenue. This is actually why many countries use a VAT (Value Added Tax) system instead of sales tax. VAT tends to be more uniform across regions and easier to administer for international commerce. The real solution might be a simplified national sales tax system with consistent rules across states, but that would require federal intervention in what has traditionally been a state's right to determine their own tax policies.

Has anyone tried just ignoring sales tax compliance in states where you only have a few sales? What's the realistic chance of getting caught if you're a really small seller? I'm only doing about $50k in sales total across all states, with most sales in my home state.