One of the reasons why some merchants are reluctant to begin collecting sales tax for multiple states is the "bureaucracy factor," including unique paperwork for each state plus the uncertain risk and cost of an audit by a state sales-tax agency.

Thus, even if someone miraculously developed a low-cost (or free) system to compute, report, and remit sales taxes for many states, merchants would still be faced with potential compliance and audit costs.

My understanding is that even the multi-state "Streamlined Sales Tax" project allows each state to conduct a separate audit of each merchant's records, and states are not bound by the results of any other state's audit. For a merchant worried about potential unfair treatment, this is a serious concern.

I'm curious if any merchants here have had the experience of being audited by an out-of-state sales tax agency (that is, a sales tax audit by a state where you do not have employees or offices), and if so, how difficult was the experience? Did they require that you physically send someone to their offices? Did they require that you provide any data that you consider sensitive? Did you worry that your confidential business data might be misused? Has anyone ever sought to dispute or appeal a determination by your state's sales-tax agency? What were the costs and procedures involved? Did the audit include any state contacts with (or burdens on) your customers, suppliers, or others with whom you've had business relationships?

I'd also appreciate if anyone could point to any resources that discuss the sales-tax audit rates for different states, especially if they distinguish sales-tax audit rates (and outcomes) for "in-state" versus "out-of-state" merchants.

I'd also appreciate any feedback on audits or demands by state tax agencies, made to companies which do not collect sales tax in that state. In other words, have any state sales-tax agencies contacted an out-of-state merchant, requesting or demanding records or information that might be used to determine whether a nexus might exist? Have out-of-state sales-tax agencies contacted your state's sales-tax agency to gather information about your business?