On taxation of
online sales
Jan Babiuch-Hall
John Barret
Owen Barton
Caroline Dobyns
Reasons for an internet
sales tax:
The lack of an internet sales tax creates an unfair
competitive advantage for online businesses.
Local businesses become showrooms for online
businesses.
Lower sales for local businesses means fewer jobs in
the community.
Local businesses often provide other benefits to the
community besides selling a product or service.
The state where the customer resides should tax the
purchase as this is the fairest way to distribute tax
revenue.
Reasons for an internet
sales tax:
When you aren't able to collect sales tax from online sales
shipped into your state, everyone who pays sales tax in your
state will pay a little bit more than they otherwise would have.
State and local government will have to raise revenue in
other ways, by increasing income or property taxes, or by
cutting spending.
State governments are losing more than $7 billion a year
because online purchases don't get taxed.
Each year about $10 billion in tax on Internet sales go
uncollected.
Tax-free Internet shopping shifts more of the sales-tax
burden to those who can least afford it.
Reasons against an
internet sales tax:
Having online purchases be tax-free creates an
incentive to purchase online, which is desirable
because online stores are more efficient.
The issue of which state collects the tax is
moot.
Instituting a tax on online sales creates a legal
hurdle for entrepreneurs wishing to start an
online business.
The benefits of tax-free online sales are
available to all customers
Reasons against an
internet sales tax:
Since online shopping is subject to shipping costs,
adding a sales tax could make online sales
unprofitable and hurt the online sales industry.
Enforcing online sales taxes is unduly
burdensome.
Online shopping has a global market; situations
would arise where it is unclear of how to apply the
tax for international sales.
A sales tax dependent on what state the item is
shipped to introduces a high risk of sales tax
evasion.