Amazon.com puts it bluntly in its most recent regulatory filing: "We do not collect sales or other taxes on shipments of most of our goods into most states in the U.S. … (Such taxes could) put us at a competitive disadvantage … (and) decrease our ability to compete with traditional retailers." Why doesn't Amazon collect sales taxes? Until recently it relied on the 1992 Supreme Court decision, Quill Corp. v. North Dakota. With Amazon now locking horns with California over the sales tax, a closer look at the Quill decision is warranted.

In Quill, North Dakota tried to compel Quill Corp., an out-of-state, mail- order house, to collect sales tax. The Supreme Court considered whether this violated the Constitution's due process or commerce clauses.

The court first held that requiring a company with no physical presence in a state to collect sales tax can satisfy due process. Due process requires "some minimum connection" between the state and the company it seeks to tax. The minimum connection existed because Quill "purposefully directed" catalogs, fliers and advertisements into the state. These contacts made the requirement to collect sales tax reasonable.

The court then turned to the commerce clause. The commerce clause empowers Congress to regulate interstate commerce. It also prohibits states from interfering with interstate commerce – the so-called "negative" or "dormant" commerce clause.

The court held that requiring tax collection violated the commerce clause when the only connection with customers in the state was by common carrier or U.S. mail. This conclusion followed an identical holding in the court's 1967 decision, Bellas Hess. Bellas Hess explained that such requirement would impede interstate business, particularly if every state, municipality and political subdivision also has the power to impose sales taxes.

The Supreme Court thus carved out a safe harbor for businesses that make sales only through mail and common carrier. However, Amazon may not fall within this safe harbor.

First, the Supreme Court noted in Bellas Hess that a state could compel a company to collect taxes if "sales were arranged by local agents in the taxing state." Indeed, California's recent law, requiring collection, relies on Amazon's network of California sales affiliates.

Second, requiring Amazon to collect sales tax would not impede interstate business. Innumerable companies collect sales tax online without disruption. It's inconceivable that Amazon, with its cutting-edge technologies such as Whispernet and Cloud Drive, would have any difficulty collecting taxes in multiple jurisdictions.

Third, Amazon's virtual storefront presence in California arguably exceeds the "mail" and "common carrier" exception. To be fair, the Quill Corp. licensed computer software to some North Dakota customers to check inventory, prices and place orders. But this is a far cry from Amazon's near-omnipresent storefronts, such as the Kindle Store.

Finally, Justice John Paul Stevens, who wrote the Quill decision, emphasized that Congress is free to change the safe harbor. Indeed, reading between the lines, Justice Stevens may have been urging Congress to change the rule, perhaps foreseeing a situation like today where Target.com, Wal-Mart and mom-and-pop stores collect sales tax online, but Amazon does not.

Amazon is a fantastic company, with excellent service, prices and technological innovation from the Kindle to the one-click purchase. Amazon does not need an unfair competitive advantage. It's time to let Amazon compete on a level playing field.

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Angelo DeSantis is a professor at the University of California, Davis, School of Law.

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