Taxation of Internet Sales

Outline

THESIS: Currently, sellers who live outside the buyer’s state are not required to charge the buyer sales tax. Many states are loosing money due to this and are trying to find ways to charge the buyer sales tax; but at what cost to the consumer and the on-line retailers.

I. Sales Tax

A. What is it

B. How do states collect it from on-line sales

II. Streamlined Sales Tax Project

A. What is it

B. What does it hope to accomplish

III. Taxation of Internet Sales

A. Business monopoly

B. Consumer privacy

When you walk into a Target or Sears to purchase a television, you know that you will most likely have to pay a sales tax on the television. If the price of the television is $299.99 and your states has their sales tax set at 5%, that television will actually cost you $314.99 when you take it home. On the other hand, if you were to purchase that same television via the internet, the cost of the television would only be $299.99 plus shipping and handling. The reason for this is that we are not charged a sales tax when we purchases items via the internet. But is it right that we do not have to pay sales tax for on-line purchases? Are the states loosing out on lost revenue? If the government would implement a law requiring sales tax on internet purchases, how would it affect the consumer and the businesses? By the end of this paper, I will have those questions answered for you.

What is sales tax? The easiest answer to this question would be to say that 45 states make the consumer pay a tax on items they purchase in brick and mortar stores within that states jurisdiction. That money is then sent to the government to be used as revenue. According to McConnell and Brue “State personal income taxes, which have much lower rates than the Federal Income tax, are the second most important source of state tax revenue.”...