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Should Internet Purchases be taxed

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Internet Purchases Should Internet Purchases be taxed Internet shopping is here to stay, its future growth with imposition of sales taxes on online shopping, may be a question mark. People are buying more than goods online, from the comfort of their homes or offices, than they bought before, the reason being that very few of the online stores charge sales tax, so the users get a discounted price on their purchases (thisnation, Dec 2006). Shopping online may be different in terms of experience, however money is still exchanged for goods – but the purchase may be made from a physically remote location. If tax is to be charged then how does one then resolve where to source the tax Supreme Court ruling in 1992 stopped states from collecting tax on out of state merchants’ phone, mail or internet orders – orders which shipped goods into another state (Wiener, Leonard). Projected estimates of lost revenue due to decrease in sales taxes collection, go as high as $55 billion by 2011. Interestingly now many of the retailers are providing option of in store pickup after ordering online, which ironically enforces sales tax collection as sales tax is compulsory on store pickup. (Leonard).
State and local governments are worried that lost revenue may decrease their ability to provide civic services at expected levels since expected revenue from store front retail sales are being increasingly cannibalized by online retail (Yegyazarian, Anush 54). If increasingly larger amounts are siphoned off then to make up for loss either newer stream of income has to be realized (by increasing taxes) or by cutting spending (thisnation, Dec 2006). Many retailers go to great lengths to avoid physical presence in high sales tax states, because they can use a lacuna in the laws and save significantly on paying the sales taxes. Economist Goolsbee argues that imposing taxes on cybershopping may could cause online sales to drop
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by as much as 24 percent. (Yegyazarian, Anush 54). Also another viewpoint is that since only wealthier Americans shop online, discounts are not helping the right segment – possibly
Decreasing taxes across the board would help the lower classes as well which actually constitute the growth market.
Shopping days without the avoidance of sales tax may be transient. Such savings in taxation is countered appreciably by Streamlined Sales Tax Project (SSTP) which is a consortium of 39 states that are working on ‘harmonizing and simplifying sales taxes so a shopper may not have the luxury of shopping in another state when one state’s taxes are higher (consumer comments, 2003). SSTP is not an easy process, different states may classify same foodstuff into separate categories, making rationalizing extremely painstaking and slow. This bait comes with a hook – if the businesses register and start collecting taxes, they may not be asked for back taxes, at least for that one year. Another look at SSTP reflects the doubt of many businesses, and online giants like Amazon are taking the position that they will only start collecting the state taxes when the process is made simple and fair (Tanner, Robert Aug 2005).
Additional taxes would make shopping dearer for the consumers decreasing the charm of online shopping and there might be an initial dip in revenue streams once sales taxes are imposed. However, since the Internet and online shopping allow for direct contact with the supplier, eliminating the middlemen therefore online shopping might still be cheaper than traditional shopping from visiting the nearby community stores.
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Works Cited
1. Thisnation.com American Government amp. Politics Online. December 9, 2006. 2 Leonard Wiener. No Longer A Tax-Free Zone : Get ready to pay taxes on online purchases. 11 March 2003. 9 December, 2006. 3. New push for Internet sales tax ominous for consumers. Consumer Comments. Volume 27, Number 4, Winter 2003.
4. Anush Yegyazarian Attention net shoppers: Cybersales taxes loom. PC World.San Francisco: Apr 2000.Vol.18,Iss.4.pg.54,2pgs
5. Robert Tanner. States expand push for sales taxes on Internet purchases August 31, 2005. 9 December, 2006
http://www.usatoday.com/tech/news/techpolicy/2005-08-31-internet-taxes_x.htm