NCPA - National Center for Policy Analysis

Governors Want On-Line Commerce Taxed

January 5, 1999

Last year, Congress declared a three-year moratorium on taxes levied on sales through the Internet. After that, the future of Internet taxation will largely rest in the hands of a panel established by the Internet Tax Freedom Act to study the question.

Opponents of taxation say the states can function very well without taking more money from their citizen's pockets.

  • Commerce across state lines is subject to state taxes only when both seller and buyer are in the same state -- or when the seller maintains a physical presence in the buyer's state.
  • Thus mail order commerce has mostly escaped sales taxes, without harming state revenues.
  • In fact, 45 states had revenues of $11.4 billion in excess of what they expected in 1998.

On-line commerce is expected to produce $300 billion in annual sales by 2002, and the National Governors' Association is on record favoring the right to impose Internet taxes.

Source: Editorial, "Killing the Electronic Goose," Investor's Business Daily, January 5, 1999.


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