Amazon has fought aggressively on this issue going back as far as 2008, as not having to collect state sales taxes gives the online retailer a distinct price advantage over bricks-and-mortar competitors.  With no VAT or sales tax at the federal level, this price advantage is anywhere between 2.9 to seven per cent depending on the state.

Online retailers have been able to avoid collecting sales taxes by citing a 1992 US Supreme Court case (Quill v. North Dakota) which decreed that a retail company does not have to collect sales taxes on behalf of a state government if it has no physical presence, such as an office or distribution centre, within the borders of that state.  Amazon has claimed that warehouses and offices located in various states across the US, operating as part of its distribution chain, are independent subsidiaries and thus do not constitute a physical presence.

However, under mounting political pressure from various retailer interest groups and state legislators - mindful of the significant amount of lost tax revenue - Amazon has reversed this strategy. The company is now choosing to make significant capital investments, such as the building of its own distribution centres, in states where it had historically claimed to not have a physical presence. The company is targeting these investments in the most populous states such as California, Texas and New York or in those states which serve as geographically strategic, such as South Carolina and Kansas. The purpose of this change in strategy is to provide as many Americans as possible with "same-day" delivery. By improving the speed by which online purchases can be delivered, Amazon hopes to compete with the instant gratification provided by traditional in-store purchases, rather than solely on price.