US Internet Policy Institute Says Overhaul Local Tax Before Taxing the Internet

Tax-news.com

31 March 2000

Economist Hal Varian Examines Internet Taxation in Series Designed To Brief Presidential and Other Candidates

States should give ``serious consideration'' to eliminating sales taxes and replacing them with consumption or income taxes before trying to enforce sales taxes on purchases made through the Internet, Hal R. Varian, Dean of the School of Information Systems and Management, University of California at Berkeley, argues in a new briefing paper written for the Internet Policy Institute (IPI).

In ``Taxation of Electronic Commerce,'' Hal R Varian writes that substituting consumption taxes for sales taxes would help eliminate ``the differential impact of remote purchases via the Internet or any other means.''

Varian is one of more than a dozen authors drafting papers for IPI's ``Briefing the President'' project, which seeks to educate the next President of the United States and other elected officials on key Internet policy issues. The papers will be compiled into a book, ``Briefing the President: What the Next President of the United States Needs to Know About the Internet and Its Transformative Impact on Society.''

The lack of sales taxes is one of the big draws of Internet shopping. In a recent survey 46 percent of online buyers said they have never paid sales tax on an Internet purchase, Varian notes. State officials, ``alarmed by the rapid growth of Internet commerce and the potential of lost sales tax revenue,'' have asked Congress to pass legislation allowing them to collect sales taxes on Internet transactions.

There are four broad policy options for lawmakers struggling with the issue of whether or not to tax the Internet, Varian writes, including:

maintain the status quo;
ban sales taxes for all Internet purchases;
allow states to collect taxes on out-of-state purchases; or
eliminate the sales tax for all purchases, online and offline.

The complete briefing paper and others are available at the IPI's Web site, at http://www.internetpolicy.org.

The Institute encourages readers to respond to the papers in writing.
The IPI is the nation's first independent, nonprofit research and educational institute created to provide objective, high-quality analysis, research, education, and outreach on economic, social and policy issues affecting and affected by the global development and use of the Internet.

SOURCE: Internet Policy Institute

FULL BRIEFING

Taxation of Electronic Commerce - April 2000
By Hal R. Varian1
Dean, School of Information Systems and Management
University of California at Berkeley
http://www.internetpolicy.org/briefing/4_00_story.html

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