We recently reported on a case out of New York State, which dealt with the question of sales tax liability in the case of online sales. That decision (in Overstock.com v. New York Taxation Dept. and the companion case of Amazon.com v. New York Taxation Dept.) decided that internet retailers are required to collect sales taxes on purchases by New York residents even if the retailers have no physical presence in the state.
The U.S. Supreme Court has decided to let this decision stand (without offering any reasons). Congress is currently considering a legislative response to this issue through the proposed Marketplace Fairness Act. Large retailers such as Amazon have the means to negotiate a solution with tax authorities on a state by state basis, but smaller companies simply do not have that leverage.
Canadian online retailers selling into the U.S. will want to seek advice on sales tax issues to ensure their tax collection and remittance policies are compliant in the United States.