NCPA - National Center for Policy Analysis

Internet Sales Tax Moratorium Expiring

August 21, 2001

The moratorium on taxing out-of-state sales over the Internet is set to expire in two months. State officials say they only want Internet sales taxed to protect main street businesses. But critics detect that they only covet the revenues such a move would bring -- a vast new source of funds for spending.

History shows that governments will usually spend all they can get their hands on.

  • From 1989 to 1999, state tax collections increased 76 percent.
  • But from 1988 to 1998, state spending went up 97 percent.

Data show that collecting those sales taxes won't be cheap for Web vendors.

  • Ernst & Young has estimated that it costs main street retailers 7 cents to collect every $1 in taxes levied.
  • But it could cost Web retailers 12 times that -- 87 cents per dollar due.

Source: Editorial, "Picking Your Pocket Online," Investor's Business Daily, August 21, 2001.


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