Evan Schuman's StorefrontBacktalk

While Amazon and the state of California were doing their political deal for online sales-tax collection, someone apparently pointed out to the state that Wal-Mart—one of the tax’s biggest backers—isn’t collecting California sales tax for some of the most expensive items on its own E-Commerce site. Wal-Mart’s explanation: The items (including boardroom-style projection systems that cost as much as $70,000) aren’t really being sold by Wal-Mart, even though Walmart.com is processing the orders and collecting the money.

That sounds just a wee bit hypocritical, especially because Wal-Mart is unquestionably required to collect sales taxes online given that it has both brick-and-mortar stores and an E-Commerce distribution center in California. But the problem—and Wal-Mart’s excuse—points out a legitimate issue when it comes to collecting those taxes online. A traditional store’s boundaries are pretty straightforward. But online, it can get a lot harder to tell one retailer ends and another begins, and exactly who is supposed to be collecting which taxes.

According to the Los Angeles Times, California’s tax agency, the Board of Equalization, has discovered that Walmart.com carries items that—the site says—are “sold and shipped” by Boston-based Wayfair LLC, which doesn’t have operations in the state. (Until September 1, Wayfair was known as CSN Stores.) Although Wal-Mart processes the order, it doesn’t collect sales tax. According to Wal-Mart, Wayfair didn’t ask Wal-Mart to collect the tax, so Wal-Mart doesn’t.

Not so fast, said Board of Equalization member Betty Yee. “As a leader in trying to enforce the new [law], they also should be leading the charge in terms of being very clear about the application of the tax on all transactions with California consumers,” Yee told the newspaper. And the retailer should be collecting sales taxes, too.

No one has said exactly how the tax bureaucrats suddenly discovered Wal-Mart’s non-collection for hundreds of products on its Web site. No doubt it was just due diligence. Or more likely a whisper from the other side of the tax-collection campaign, in which the politics are—not surprisingly—getting increasingly hardball.

There’s a real problem here that goes beyond Wal-Mart, though. Sales-tax rules were designed for the physical world, where anyone from a pushcart vendor to a giant department store could be required to get a permit and collect the tax on every sale. Even if one retailer is physically located inside another retailer’s store, it’s still possible to separate out who each transaction belongs to—and thus who the tax board should be going after.

Online, it’s messier.