You don't know it, but you are probably a tax scofflaw-- because you haven't paid your "use tax." If you purchase, say, a stereo from a store in your state (and your state has a sales tax), you'll pay sales tax on that purchase. But when you buy the same stereo on-line from, say, Amazon.com, odds are that Amazon won't add sales tax to your purchase price. The laws of all sales tax states are quite clear on what is supposed to happen in this situation: you, as the purchaser, are supposed to pay the "use tax", which has exactly the same tax rates and tax base as the regular sales tax. But individual consumers purchasing items online very rarely pay the tax in this situation, and states typically make little effort to enforce it, as least with respect to household purchases (as opposed to business purchases).
If one wanted to make a short list of tax reforms that could lead to effective enforcement of the use tax, two things high on that list would be (a) that when a retailer in state X sells a sales-taxable item to a consumer in state Y, and does not collect sales tax on that item because they have no physical presence in state Y, then the retailer should have to remind the purchaser that they are legally required to pay the use tax, and (b) that under this same scenario, the retailer should have to alert state Y's Dept. of Revenue that these transactions took place.
This is precisely what Colorado did when it enacted House Bill 1193 earlier this year. The new law requires companies like Amazon, which has no physical presence in the state, to send a reminder to purchasers that they are supposed to pay the use tax. It also requires these companies to send an end-of-year statement to the state revenue department summarizing the value of untaxed sales to each customer. The law does NOT require Amazon to collect a dime of additional tax.
Earlier this week, Amazon responded to this law by dropping all its affiliates in the state of Colorado. (Affiliates are individuals or companies who put a link to Amazon on their own website, and earn a share of the take when customers click-through to buy things on Amazon's website.) As the Center on Budget and Policy Priorities' Michael Mazerov notes in a statement on Amazon's actions, this is a purely punitive action that has no relationship to the new law: the new reporting requirements under HB 1193 don't depend on whether a sale was made through a "click-through" affiliate, and even after dropping its affiliates, Amazon will still have to comply with the law. Amazon's actions can only be interpreted as a politically motivated attempt to rile up anti-tax sentiment sufficiently so that Colorado lawmakers will repeal the new law.
The use tax should be enforced by every state. Colorado's approach to doing so is sensible and fair, and does not impose substantial burdens on sellers like Amazon. By hitting its own affiliates in their wallets, Amazon is avoiding an open discussion of why they apparently believe the use tax should be repealed.