Internet taxation is turning out to be a hot topic today. Presidential
candidates are talking about it. George W. Bush has pledged
to support a duty-free Internet, while Al Gore has called a tax-free internet
"a catastrophe for local governments." Even President Clinton has changed
his mind on the subject by acknowledging that a web sales tax is needed.
Supporters of internet taxation worry that tax-free internet purchases
would erode state and local revenues
and shift the burden onto lower income households. Opponents of internet
taxation point out that even with the explosion of e-commerce, state and
local sales tax revenues have been rising. More moderates would point out
that current state use taxes, which are allowed under the Internet Tax Freedom
Act, already allow states to collect revenue from e-commerce purchases.
North Carolina added a use tax line to the 1999 NC Income Tax form.
Several basic issues need to be addressed:
- Is it really fair not to tax internet purchases, in effect giving e-commerce
a tax subsidy?
- If e-commerce really is the future, why should it need to be given a
sales tax exemption in order for e-commerce to succeed?
- How would an equitable sales tax be implemented, considering there are
over 6,000 sales tax jurisdictions nationwide?
- Who would get the sales tax revenue? The state the server is located
in or the state in which the purchaser is located?