Evan Schuman's StorefrontBacktalk

Despite California’s well-known status as a regulatory vanguard, Massachusetts is becoming a state that strikes fear into many retailers these days, particularly when it comes to data protection, said Sotto, the New York lawyer. “There are a number of states that have security requirements so that entities are required to implement reasonable security to safeguard information,” Sotto said. “Some states have gone further than others, but Massachusetts’ legal actions are very extensive and take on many of the characteristics of European data protection laws which are the most onerous in the world.”

Riehl said retailers can strive to craft their business practices to comply with the laws and regulations of the toughest states, such as Massachusetts. But Sotto noted this doesn’t necessarily work because compliance with even a tough state’s provisions does not mean a retailer is in the clear with another state. “There are some conflicts,” Riehl said. “Under the Massachusetts data breach notification law you are not allowed to indicate in a letter to affected individuals what happened. But for other states you are required to indicate what happened.”

Simply put, there is no way around keeping an eye on all the states all the time. However, some big retailers, such as Amazon, are actively trying to level the playing field. In Amazon’s case, the big issue is state collection of taxes from Internet sales, an issue that directly affects the E-Commerce powerhouse’s reliance on affiliate marketing.

“The Internet sales tax point is greatly troubling a lot of people in the affiliate marketing industry,” Baer said. “New York passed a law, about a year and a half ago, which basically said if you are an online merchant and you have affiliates located in New York, that can create a nexus for sales tax purposes and expose all sales in New York to the sales tax even if your business has no employees in New York. Other states, seeing a great source of potential revenue, are now jumping on that bandwagon.”

He said Hawaii is on the verge of enacting a law similar to New York’s as are a number of other states including California and North Carolina. Although the U.S. Supreme Court held that states cannot require collection of sales taxes by sellers who do not have a physical presence there, the court said Congress has the power to allow states to force those sellers to collect taxes. Fewer than half the states (22) have signed on as members of an initiative aimed at resolving the sales tax problem.

Riehl noted that gift card rules and regulations are another source of grief for compliance-conscious, multi-state vendors. “They are subject to different rules in different states,” she said. “They can have expiration dates in some states but not in others. States are powerful in their ability, depending on how bit their economy is. They very closely guard the abilities and constitutional rights, their sovereign ability to tax and impose rules. And the states have their own powerful lobbies in D.C.”

Riehl said the NRF believes one of its most important functions is, like a kid at a carnival playing Whac-a-Mole, to keep track of the ever-changing landscape of state regulatory efforts. “We spend a lot of time monitoring this,” she said. “But we miss things too.” Making matters even crazier for retailers is the fact that many county and municipal governments “can be activists as well” when it comes to retail regulation, she noted.