I used to sell digital items online, some examples of items I sold are
E-Topps, Diablo 2, MTGO (magic the gathering online), (UO) ultima
online and Anarchy Online. These were all "digital items" for lack of
a better word - they existed on remote servers (usually game servers)
and held real world value because of their rarity/power.

MTGO is the first and only game I know of to actually sell the items
in addition to the one time fee of the account. They also do something
that is unique only to them (of the games I have played) - they charge
sales tax on every sale. After asking about it, someone from their
tech support informed me that they have a state sales tax account in
the X amount of states that allow MTGO. This means they must go
through county-by-county (there must be thousands of counties) and pay
each one their respective tax.

My question is whether a business (in the U.S. - selling to U.S.
customers) must do what they are doing to legally deal in digital
items. Looking for a simple yes or no answer and any legal documents
or links to articles or message board topics.

For games such as in Diablo II, all the items are the property of
Blizzard Entertainment so when a user sells to another user, you're
basically charging "finder's fee" of some sort (not a sale).  From
your question, I assume that you're wondering if there'll be a tax of
Blizzard itself sells to the customers.  In that case, the item is
considered a digital product (same category as downloading products
with no physical exchange).
So then the question is yes, there are sales taxes, but only for
certain states.  The difference in various states is because the
Internet Tax Freedom Act (ITFA) set no restrictions on whether states
can tax sales over the Internet.

http://www.ecommercetax.com/doc/020401.htm
On the second last paragraph, "The States have not yet addressed
online compliance related to digital products. However, because at
least half of the States currently collect sales tax on digital
products this is an issue that will have to be worked on."  shows that
at least half of the states are collecting sales tax on digital
products.

http://www.grammy.com/news/artswatch/1202sstp.html
The paragraph starting with "On Nov. 12, ..." has the following text:
"State policies now vary widely; for example, in California,
electronic downloads are not taxed, but in Washington, digital
products are taxable if their physical equivalent is taxable."

Search terms: combinations of digital, items/products, sales, tax,
taxation, taxes, VAT, digital sales

I hope this has helped,
Best regards
Tox-ga

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Clarification of Answer by tox-ga on 04 May 2003 22:40 PDT

One interesting article to read is 
http://www.pcmag.com/article2/0,4149,901631,00.asp

There are many people who believe such taxation as ones on MTGO are
illegal due to what is written in the constitution:
No Tax or Duty shall be laid on Articles exported from any State. No
preference shall be given by any Regulation of Commerce or Revenue to
the Ports of one State over those of another: nor shall vessels bound
to, or from, one State, be obliged to enter, clear or pay duties in
another. —Article 1, section 9 of the US Constitution.

Thanks for the fast response