NCPA - National Center for Policy Analysis

If Internet Sales Were Taxed This Christmas

December 7, 1999

By early indications, holiday retail sales will increase again this year -- by perhaps 6 percent over last year. But you can bet your last Christmas-shopping dollar sales over the Internet will soar in the last month of the 20th century.

  • According to Jupiter Communications, 1999 holiday online sales are expected to hit $6 billion -- nearly double the $3.1 billion spent last year.
  • Surveys by others predict Internet spending will reach even loftier levels -- anywhere from $9.5 billion to $12.2 billion.

Sen. Ernest Hollings (D-S.C.) has introduced legislation which would impose a 5 percent tax on Internet sales. How much of a crimp would that put in gift-giving?

  • If sales come in at around $6 billion, Americans would have to pay an extra $300 million in taxes -- or $610 million if sales hit $12.2 billion.
  • Since many couldn't afford the additional 5 percent, they would simply reduce the amount they purchased -- lowering total sales.

Of course sales taxes vary from state to state. Consumers in Colorado pay 3 percent, while residents of Rhode Island and Mississippi pay 7 percent. Five states have no sales tax at all.

Source: Merrill Matthews Jr. (USA Radio Network), "A Good Way to Spoil Christmas," Investor's Business Daily, December 6, 1999.


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