States, counties and municipalities have historically relied on local brick-and-mortar businesses to collect retail sales taxes. These businesses collected the sales tax from their customers, and then remitted the tax proceeds to their local sales tax jurisdiction. It was a straightforward process, and no one much quarreled with who owed the taxes and who would receive them.
That straightforward proposition became complex with the rise of thousands of catalog merchants in the ‘70s and ‘80s. Catalog merchants sold to consumers nationwide, who began to shift their purchases away from local brick-and-mortar merchants. This reduced revenue to local sales tax jurisdictions because catalog companies rarely collected sales taxes from their customers.
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