Evan Schuman's StorefrontBacktalk

And states will have to provide—and keep updated—the databases the software uses to identify which products and services are subject to the taxes, as well as how the boundaries are drawn. In short, if a merchant uses the state’s software and database, the merchant is off the hook for any errors—and the software should handle most of the complexities.

That’s actually a much better deal than most big chains (or small retailers, for that matter) currently get from their state sales-tax authorities. Since the bill also specifies that out-of-state “remote” retailers can’t be required to collect taxes differently than in-state stores, brick-and-mortar chains would be crazy to pass up the opportunity to get access to those databases—and to the centralized tax filing that the bill also requires—both for their own in-state online commerce and for physical stores.

Unfortunately, the bill requires that states provide the software and databases if it wants remote sellers to collect sales tax for them. It doesn’t specify anything else. That means there’s a good chance that some states, at least, will provide buggy software that only runs under its own operating system, while others may port the aging minicomputer application they use at the Bureau of Equalization to MS-DOS and claim that’s enough.

What would be much smarter—though harder for large retailers to integrate—would be something cloud-based, so the state wouldn’t have to push out updates to every E-tailer across the country. Ordinarily doing something like that wouldn’t be likely, especially since states aren’t known for cutting-edge systems.

But there’s potentially a lot of money on the table from better sales-tax collection, and states are only able to require collection from remote merchants under a federal law. If one merchant thinks a state hasn’t fulfilled the requirements of the law, the place to go is federal court—and losing there might mean a state would have to somehow refund all the taxes it collected from remote retailers. In that light, spending a little more on a clean IT solution to the tax-software problem might be worth it.

And considering that so many unhappy E-tailers really were hoping out-of-state collection of online sales taxes would die in committee again, this will almost certainly will end up in court anyway at the first hint of an excuse. That being the case, unusable software isn’t an excuse any state should want to offer.