State by state, ecommerce giant Amazon.com is on its way to collecting sales and use tax in most of the country. Since last October, it has added five states plus the District of Columbia to its About Sales Tax webpage, which lists where “items sold by Amazon.com LLC, or its subsidiaries,” are subject to tax. In October, it was D.C.; in November, Alabama; and on January 1, 2017, Iowa, Louisiana, Nebraska, and Utah joined the list.

Earlier this week, South Dakota Governor Dennis Daugaard revealed that Amazon would collect South Dakota tax beginning February 1. Yesterday, Wyoming Governor Matt Mead made a similar announcement: “Amazon will begin collecting tax on its sales to Wyoming consumers and businesses beginning March 1st of 2017.” One wonders which state will be next.

According to Gov. Mead’s press release, this is a voluntary collection agreement. Amazon doesn’t have a substantial physical presence in Wyoming and is therefore not required by law to collect tax on Wyoming transactions. Those sales aren’t exempt — as in other states with a sales tax, consumers owe the corresponding use tax when sales tax wasn’t collected at check out. Yet consumer use tax compliance is extremely low, and enforcement is difficult.

As a result, states have seen their sales and use tax revenues decrease with the rise of ecommerce. Local brick-and-mortar stores that once made up the sales tax base are having trouble competing with online sellers that don’t charge tax (and do ship packages to the customer’s door). Therefore, Main Street businesses and many state lawmakers are demanding a more level playing field, one where internet sellers also have to collect tax.

However, a state can’t simply tax remote retailers that lack a substantial connection, or nexus, to it. Under existing precedent, upheld by the Commerce Clause of the United States Constitution and several decisions by the Supreme Court of the United States (notably Quill Corp. v. North Dakota, 1992), nexus exists only when a business has a substantial physical presence in a state.

To attempt to capture more remote sales tax revenue, a number of states have enacted affiliate or click-through nexus laws, whereby a substantial connection is established through links on websites and ties with in-state affiliates. A few, including Alabama and South Dakota have instituted economic nexus policies that base the state’s right to tax remote sales on its economic need of sales and use tax revenue. Others require non-collecting remote retailers to inform customers and the state of their use tax obligations.

Such laws and policies make a point, but they’re difficult to enforce given Quill and the Commerce Clause. They would have more teeth if Quill were overturned, or if Congress granted states the right to tax remote sales. Several states are hoping challenges to their policies will lead to an overturning of Quill. Others are putting their money on a federal solution (read more about the bills awaiting consideration on Capitol Hill).

Wyoming will be the 35th state where sales by Amazon and its subsidiaries are taxed. Five states — Alaska, Delaware, Montana, New Hampshire, and Oregon — don’t have a general state sales tax. That leaves only ten states where sales tax isn’t automatically applied to Amazon transactions: Arkansas, Hawaii, Idaho, Maine, Mississippi, Missouri, New Mexico, Oklahoma, Rhode Island, and Vermont. Many of those already have some sort of policy in place to enhance remote sales and use tax collections, such as Vermont’s use tax notification requirement. Others, like Mississippi, are working to adopt one.

Amazon’s motivation for voluntarily collecting tax in so many new states is unclear; the company has been tight-lipped about it, allowing states to make the announcements. Although it has fought internet sales tax laws in the past, in recent years it has lobbied for a federal solution. Its support is welcome, but it’s not enough. It’s the largest internet seller in the land, but it isn’t the only one and its decision to collect tax doesn’t solve the larger issue facing states: that they lack the authority to tax these sales.

Wyoming Governor Mead called Amazon’s voluntary collection “an important step in the right direction.” Yet he also pointed out that the battle isn’t won: “I encourage the Legislature to continue to work on the remote seller’s bill.” Last fall, Wyoming lawmakers drafted a remote sales tax bill that would more widely apply to out-of-state sellers. It has the governor’s support.

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